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WORKS  BY  JAMES  PLATT,  F.S.S. 

Business.  Authorized  American  Edition,  reprinted 
from  the  75th  English  Edition.  i6mo,  pp.  xiv.  + 
249 75  cts. 

"  If  I  might  give  a  short  hint  to  an  impartial  writer,  it  would  be 
to  tell  him  his  fate.  If  he  resolves  to  venture  upon  the  dangerous 
precipice  of  telling  unvarnished  truth,  let  him  proclaim  war  with 
mankind — neither  to  give  nor  take  quarter.  If  he  tells  the  crimes 
of  great  men,  they  fall  upon  him  with  the  iron  hands  of  the  law  ; 
if  he  tells  them  of  virtue,  when  they  have  any,  then  the  mob 
attacks  him  with  slander  ;  but,  if  he  regards  truth,  let  him  expect 
martyrdom  on  both  sides,  and  then  he  may  go  on  fearless." — De 
Foe. 

Money.    Authorized  American  Edition,  reprinted  from 
the  19th  English  Edition.     l6mo,  pp.  277,    75  cts. 

Life.     Authorized  American  Edition,   reprinted  from 
the  2ist  English  Edition.     i6mo.     {In  press.) 

G.  P.  PUTNAM'S  SONS,  NEW  YORK. 


MON  EY 


BY 


JAMES    PLATT,  F.S.S. 


AUTHOR   OF 

BUSINESS,"  "MORALITY,"  "LIFE,"  "ECONOMY,"  "PROGRESS," 

AND  "POVERTY" 


REPRINTED,  UNDER  ARRANGEMENT   WITH  THE   AUTHOR,   FROM  THE 
NINETEENTH    ENGLISH    EDITION 


NEW   YORK  AND   LONDON 

G.  P.  PUTNAM'S    SONS 

S^t  '^nicktrbocktr  ^kss 
1889 


Zbc  Iknicfterbocftcr  press 

Electrotyped  and  Printed  by 

G.  P.  Putnam's  Sons 


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I    C    L     C     •    < 


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»    •     •         •     •    • 

•  •      •  • 


c  a      c 

C  C     L 


i 


CONTENTS 


PAGB 

Preface          v 

Money * 

The  Origin  of  Money 13 

What  is  Money  ? 29 

Currency 42 

Gold  Money 53 

Silver  Money 60 

Paper  Money,  Bank  Notes,  Checks    ...  69 

Bills  of  Exchange 99 

Bank  Shares 106 

Banking ^^^ 

Exchange ^47 

Interest        .        .         .        •        •        •        •         •  ^53 

Wealth ^^^ 

Capital 1S8 

Panics ^9^ 

Individual  Success 213 

National  Prosperity 230 

Concluding  Remarks 254 


ui 


389104 


PREFACE. 

Und  es  herrscht  der  Erde  Gott,  das  Geld. — Schiller. 
(  "  And  it  rules  as  God  of  the  world,  '  Money.'  "  ) 

Money  !  an  attractive  title — a  subject  every  man  is 
interested  in  ;  and  my  object  is  to  bring  clearly  before 
your  mind  how  largely  the  success  of  English  trade  de- 
pends upon  the  currency  laws  in  relation  to  our  system 
of  banking,  that  being  the  recognized  medium  for  sup- 
plying borrowed  capital,  the  life-blood  upon  which  our 
large  trade  depends  ;  and  I  hope  to  awaken  within  you 
a  desire  to  understand  this  subject  better  than  hereto- 
fore. That  it  is  no  easy  task  to  rouse  men  of  business 
to  think,  and  that  they  cling  most  tenaciously  to  old 
customs,  I  am  well  aware  ;  but  the  present  times  will 
compel  them  to  hesitate,  and  ponder  as  to  how  trade  is 
to  be  got  and  business  is  to  be  done  ;  whereas  hitherto 
they  have  let  daily  affairs  float  before  them,  content  to 
seize  hold  of  what  they  could  as  it  passed  them  by,  so 
long  as  they  felt  satisfied  that  the  system  in  operation 
would  last  their  time.  It  is  this  supineness,  this  igno- 
rance of  the  delicacy  and  refinement  of  our  banking  and 
monetary  system,  that  the  future  of  commerce  has  so 
much  to  dread. 

The  power  of  money  is  immense,  the  benefit  of  our 
banking  system  to  traders  only  known  to  those  who  use 
it ;  but  it  must  be  remembered  that  in  exact  proportion 


vi  PREFACE. 

to  the  power  of  the  system  is  its  delicacy.  This  extreme 
sensitiveness  causes  our  periodical  panics.  The  amount 
of  money  held  by  bankers  on  short  notice  or  on  demand 
is  enormous  ;  money  that  the  owners  could  all  ask  for, 
money  that  in  a  panic  many  do  ask  for  ;  and  then  it  is 
perceived  in  what  danger  our  industrial  system,  and  the 
banking  system  upon  which  it  depends,  really  are. 
Money  will  not  manage  itself.  Our  bankers  have  a 
large  sum  of  money  to  manage  ;  the  task  is  not  an  easy 
one.  The  principle  of  our  currency  law  is  right  ;  but  in 
1844,  when  started,  there  was  nothing  like  the  commerce  or 
the  deposit  and  banking  business  that  now  exists,  and  the 
time  has  come  when  it  is  imperative  upon  us  to  examine  the 
system  on  which  the  great  masses  of  money  are  manipulat- 
ed, and  we  must  have  the  will  and  courage  to  go  to  the  root 
of  the  subject.  No  labor  ought  to  daunt  us,  no  prejudice 
should  hinder  us,  no  alarm  at  the  convictions  our  in- 
quiries may  draw  us  to  should  make  us  recoil  from  their 
conclusions,  as  upon  our  commercial  system  our  exist- 
ence as  a  nation  depends,  and  to  maintain  that  com- 
mercial supremacy  we  must  be  sure  that  our  currency 
system  is  not  only  safe  and  right,  but  the  useful  tool  it 
should  be,  might  be,  would  be,  if  we  thoroughly  grasped 
the  subject. 

"  Money,"  how  few  understand  it  ;  and  although  all 
are  so  eager  for  it,  yet  how  few  know  how  to  use  it 
wisely,  or  understand  what  money  is,-  its  nature  and 
qualities  ;  how  powerful  a  small  amount  of  it  is  if 
judiciously  used  ;  how  impotent,  useless,  worse  than  use- 
less, to  its  possessor,  if  he  does  not  understand  its  nature, 
and  how  to  use  the  power  in  his  hand.  Adam  Smith 
clearly  demonstrated  that   labor  is  the    one   and    only 


PREFACE.  vii 

original  source  of  the  wealth  of  nations  ;  but  we  still 
want  a  writer  of  equal  calibre  to  clearly  demonstrate  to 
the  people  that  the  causes  of,  and  remedies  for,  the  dis- 
tress and  misery  we  are  subjected  to  as  a  commercial 
nation  from  periodical  "  panics,"  arise  from  the  people's 
ignorance  of  "  money,"  what  it  can  and  what  it  cannot 
do,  and  its  function  as  a  medium  of  exchange. 
"  Money,"  in  its  various  forms  of  credit,  bank  notes, 
bills,  checks,  is  an  enigma  to  the  mass.  To  supply 
this  information,  so  as  to  enable  the  people  to  compre- 
hend business,  and  how  to  make  money  morally,  would 
be  one  of  the  greatest  and  most  beneficial  reforms  ever 
achieved. 

To  men  I  say  :  Be  more  in  earnest ;  never  let  slip  a 
golden  moment  ;  for  "Fortune,  the  one  goddess  we  all 
so  strive  to  catch,  turns  a  bald  head  to  those  to  whom 
she  has  once  presented  her  locks  in  front,  and  who  have 
hesitated,  and  not  taken  hold." 

"  Why  wilt  tlioii  defer  thy  good  purpose  from  day  to  day?     Arise, 

and  begin  in  this  very  instant,   and  say,  Now  is  the  time  for 

doing,  now  is  the  time  for  striving,  now  is  the  fit  time  to  amend 

myself." 

Thomas  A  Kempis. 

The  essential  point  is  to  arouse  greater  earnestness,  and 
a  desire  to  begin  at  once;  delay  makes  the  danger.  Now 
is  the  time  for  action.  Be  prompt  ;  whatever  is  impor- 
tant enough  to  be  necessary  to  be  done  ought  to  be  done 
at  once,  and  so  got  out  of  hand  with  as  much  dispatch 
as  possible.  The  success  of  nearly  all  great  men,  in 
every  trade  or  profession,  may  be  traced  to  a  spirit  of 
promptitude  ;  they  put  into  practice  the  maxims,  the  in- 
stincts  which   earnest    men    have    bequeathed    to   us : 


Viii  PREFACE. 

"  Never  put  off  till  to-morrow  what  can  be  done  to-day." 
"Strike  while  the  iron  is  hot."  "Make  hay  while  the 
sun  shines,"  "  Hesitancy  and  loitering  destroy  earnest- 
ness." To  succeed,  you  must  have  decision  of  character, 
be  able  to  decide  promptly,  and  be  ever  in  advance  of 
your  opponents,  comprehending  and  satisfying  the  wants 
of  the  times  and  age  you  live  in. 

The  importance  of  a  knowledge  of  what  "  Money  "  is, 
is  best  illustrated  by  the  case  of  Overend,  Gurney,  &  Co. 
Within  ten  years,  to  descend  from  the  highest  pinnacle, 
standing  next  to  the  Bank  of  England  in  London — no 
English  firm  so  well  known  abroad  ;  yet,  by  reckless  mis- 
use of  the  immense  wealth  they  had  in  their  hands,  in 
six  years  they  lost  all  their  own  and  other  people's  money 
— a  result  solely  attributable  and  traceable  to  their  inca- 
pacity for,  and  ignorance  of,  the  duties  of  their  position; 
a  result  inevitable  again,  as  also  in  similar  cases  to  the 
City  of  Glasgow  Bank,  unless  the  people  generally  better 
understand  what  money  is.  Do  not  be  alarmed.  I  am 
no  rash  innovator,  do  not  want  to  proceed  too  fast,  the 
last  man  to  urge  any  change  in  so  delicate  a  subject  as 
"currency,"  but  quite  satisfied  that  the  time  has  come 
when  "business,"  "money,"  and  kindred  subjects  must 
form  part  of  every  Englishman's  education,  and  also 
convinced  that  if  taken  up  at  the  right  time,  the  subjects 
are  of  such  interest  that  a//  would  be  eager  to  under- 
stand them.  I  ask  for  the  earnest  co-operation  alike 
from  the  pulpit,  platform,  and  school  board,  to  urge 
upon  the  people  the  importance  for  the  future  well-being 
of  the  nation,  that  all  English  youths  be  taught  such 
subjects,  and  so,  step  by  step,  we  may  make  men  more 
thoughtful,  better  men  of  business — their  actions  the  re- 


PREFACE.  IX 

suit  of  Study  and  reflection.  The  end  maybe  a  long  way 
off,  but  it  is  of  the  greatest  importance  that  a  beginning 
should  be  made.  Do  not  expect  too  much  at  first  ;  care- 
fully test  every  step  as  you  advance,  make  every  foothold 
sure ;  sustained  under  all  difificulties  with  the  conviction 
that  every  step  onward,  upward,  must  be,  will  be,  of 
benefit  to  mankind. 

It  is  surprising  how  few  people  in  this  commercial 
metropolis  devote  their  leisure  time  to  the  study  of  works 
on  money,  banking,  finance,  etc.;  to  literature  so  calcu- 
lated to  give  them  correct  principles  upon  which  to  guide 
their  actions  and  enlarge  their  mental  views,  by  enabling 
them  to  get  or  take  more  comprehensive  ideas  on  a  mat- 
ter that  comes  under  their  daily  notice  ;  such  books  be- 
ing useful  not  only  from  the  information  they  impart,  but 
from  the  impressions  they  produce  and  the  suggestions 
they  prompt  to  the  mind   from   the  recollections  they 
awaken  when  one  has  to  decide  the  acts  of  one's  daily 
life.     Decision  is  a  most  essential  quality,  and  the  want 
of  it  may  be  attributed  to  one's  ignorance  of  the  subject 
one  has  to  give  a  decision  upon.     Every  man  needs  to 
be  reminded  of  the  importance  of  a  steady  adherence  to 
sound  principles.     Books  upon  the  subject  we  are  en- 
gaged   upon,    by  men  who   have  thought    and    written 
thereon,  act  as  a  safety  valve,  and  keep  more  particularly 
those  whose  time  is   fully  occupied,  business  men,  from 
going  astray  ;  such  books  strengthen,  as  it  were,  the  im- 
pression in  the  mind  of  the  necessity  of  firmness,  and  the 
wisdom  of  being  guided  in  our  conduct  by  a  fixed  line  of 
action,  and  cause  our  life  to  be  guided  by  knowledge  in- 
stead of  by  caprice.     It  may  be  taken  as  an  axiom  that 
the  more  frequently  the  right  path  is  pointed  out  to  us 


X  PREFACE. 

the  less  likely  are  we  to  wander  into  those  which  are  for- 
bidden. We  all  err,  and  deviate  more  or  less  from  the 
laws  alike  of  God  and  man.  My  object  will  be  achieved 
if  I  can  get  you  to  think  that  for  every  such  error  we 
have  to  pay  the  penalty — that  as  we  sow  so  shall  we 
reap  ;  and  to  stimulate  into  activity  your  better  resolves; 
by  rousing  your  self-respect  to  be  better  men  ;  not  to  be 
disheartened  by  the  past  ;  but,  feeling  that  you  have  paid 
the  penalties  the  laws  of  God  and  man  exact,  you  will 
begin  afresh  and  manifest  your  repentance  by  your 
higher  aims  and  earnest  strenuous  efforts  ;  and  to  be- 
lieve that  God  will  be  satisfied  by  the  motives  that  con- 
trol and  guide  your  daily  acts.  There  is  good  in  the 
worst  creature  that  ever  lived,  if  the  right  means  be 
adopted  to  bring  it  out  ;  no  one  is  lost  whilst  there 
lingers  within  him  any  sense  of  shame. 

"  The  little  I  have  seen  of  the  world  teaches  me  to  look  upon  the 
errors  of  others  in  sorrow,  not  in  anger.  When  I  take  up  the  history 
of  one  heart  that  has  sinned  and  suffered,  and  represent  to  myself  the 
struggle  and  temptation  it  has  passed  through,  the  brief  pulsations  of 
joy,  the  feverish  inquietude  of  hope  and  fear,  the  pressure  of  want, 
the  desertion  of  friends, — I  would  fain  leave  the  soul  of  my  fellow- 
man  with  Him  from  whose  hand  it  came." — Longfellow. 

When  we  think  of  men's  conduct  in  the  pursuit  of 
wealth,  we  need  have  present  to  our  mind  the  sublime 
charity  embodied  in  the  above  words,  and  to  ask  our- 
selves :  Was  money  made  for  man,  or  man  to  make 
money  ?  Can  we  sincerely  believe  that  the  lower  was 
intended  to  rule  over  the  higher  faculties  of  man's 
nature  ?  Is  not  the  present  life  of  the  majority  of  us 
cursed  by  an  abuse  of  the  lower,  instead  of  being  blessed 
by  the  intelligent  use  of  the  higher  faculties  ?    And  can 


PREFACE.  xi 

we  believe  seriously  that  it  is  not  possible,  by  earnest 
effort,  to  attain  a  purer  aim  in  life,  by  developing  the 
better  impulses  of  our  nature,  and  using  faithfully  and 
truly  the  nobler  part  of  us  ;  so  that  life  might  become  to 
us  a  real  wholesome  pleasure — the  substance,  instead  of 
the  shadowy  substitute  supplied  by  a  social  position 
founded  on  wealth  only,  and  the  hollow  happiness  based 
upon  external  show  and  glitter  ? 

I  agree  with  Goethe  :  "  But  let  a  man  thoroughly 
realize  what  he  is,  and  he  will  soon  rise  to  be  what  he 
should  be."  What  is  wanted  is  to  make  men  more 
familiar  with  the  best  types  of  humanity  ;  and  greater 
effort  to  be  made  to  exalt  their  conception  of  human 
nature.  If  they  cannot  all  be  great,  they  may  be  better 
than  they  are,  and  at  the  very  least  it  is  open  to  all  men 
to  be  good  and  truthful,  and  faithful  to  duty,  doing  their 
work  here  intelligently,  honestly,  and  thoroughly. 

"  The  best  of  every  man's  performance  here 
Is  to  discharge  the  duties  of  his  sphere." 

COWPER. 


MONEY. 


Money  is  a  commodity,  of  the  same  general  nature  as 
all  other  commodities,  accepted  as  a  representative  sign 
of  the  value  of  all  other  things,  to  act  as  a  medium  of 
exchange,  to  get  over  the  difficulties  of  direct  barter. 
Thus  a  purchase  for  money  involves  two  exchanges  ;  it 
is  only  half,  not  of  a  nenchange — as  Mr.  Macleod  puts 
it  in  his  useful  book,  "  Economics  for  Beginners  " — but 
of  a  transaction  of  procuring  by  two  operations  of  the 
tool,  money,  the  commodity  desired.  Aristotle  says  : 
"  It  was  agreed  to  give  and  to  receive  in  exchange  a  sub- 
stance which,  useful  in  itself,  was  easily  available  for  the 
common  requirements  of  life  ;  iron  or  silver,  for  exam- 
ple, or  some  other  analogous  substance,  of  which  the 
dimensions  and  the  weight  were  first  determined,  and 
which  subsequently,  in  order  to  save  the  trouble  of  per- 
petually weighing  and  measuring,  was  marked  with  a 
particular  stamp  in  token  of  its  value.  With  money,  the 
outcome  of  the  earliest  indispensable  exchanges,  arose 
also  another  sale,  another  form  of  acquisition,  exceed- 
ingly simple  in  its  origin,  but  soon  develoned  by  expe- 
rience, as  it  was  discovered  that  the  circulation  of  arti- 
cles was  the  source  and  the  means  of  considerable 
profit."  The  above  contains  the  philosophical  expe- 
rience of  the  soundest  and  most  advanced  theory  of  the 

I ' 


2  MONE  Y. 

true  properties  of,  and  the  value  to  commerce  of,  money. 
Money  must  have  a  value  of  its  own,  corresponding  to 
its  conventional  value  as  a  circulating  medium  ;  money 
is  a  commodity,  a  species  of  wealth,  with  an  enhanced 
value  owing  to  its  being  the  best  medium  of  exchange, 
as  it  is  the  most  convenient  representative  thing,  the 
most  general  and  convenient  measure  of  all  other  com- 
modities or  things.  But  it  is  essential  that  people  gener- 
ally should  understand  better  that  although  a  wealth  in 
itself,  its  chief  power  consists  in  its  power  to  secure  all 
other  wealth  ;  its  utility  consists  in  its  ready  convertibil- 
ity, its  ready  adaptability,  nearly  everywhere,  in  exchan- 
ging itself  for  any  other  article  needed.  As  Aristotle 
puts  it :  "  Might  not  the  moneyed  man  be  lacking  in 
some  thing  of  primary  necessity  ;  and  is  not  that  an 
ironical  kind  of  wealth  which  does  not  prevent  a  man 
from  dying  of  hunger,  like  the  Midas  of  mythology, 
whose  avaricious  desire  changed  into  gold  all  the  viands 
on  his  table  ?  "  Money  should  be  used,  not  hoarded  ; 
its  utility  consists  in  its  effecting  exchange,  not  in  being 
kept  idle. 

Very  few  men  have  the  true  theory  of  money  in  their 
minds,  and  the  importance  of  the  coin  being  an  article 
of  wealth  as  well  as  of  its  mercantile  value  as  a  circulat- 
ing medium  should  be  brought  more  prominently  before 
their  notice.  No  government  should  be  allowed  to  de- 
base the  coinage  ;  the  coin  in  circulation  should  be 
always  really  the  value  it  represents,  and  not  a  fictitious 
value  put  upon  it  by  the  government  stamp.  Incon- 
vertible paper  money  is  of  the  same  nature  as  debased 
money,  issued  under  the  false  plea  that  money  is  only  a 
sign,  that  any  thing  will  do  if  passable  ;  like  accommo- 


MONE  y.  3 

dation  bills,  they  do  not  represent  value  received,  and 
deplorable  consequences  follow  from  their  adoption  by 
the  individual  or  nation.  Common-sense,  as  well  as  the 
true  commercial  instinct,  warns  us  to  adhere  strictly  to 
the  tr  \e  monetary  principles — notes  issued  against  secur- 
ity and  convertible  into  coin,  or  value,  based  upon  the 
honest  utterance  of  a  genuine  metallic  coinage.  As  a 
rule,  free  people  never  have  bad  money  ;  whereas  the 
temptation  is  constant  to  a  despotic  power  to  defraud  its 
subjects,  and  so  to  realize  at  their  expense  unlawful 
gain,  by  imposing  on  them  as  genuine,  money,  which 
has  neither  the  purity  nor  the  weight  necessary  in  order 
that  its  real  value  should  correspond  to  the  nominal 
value  for  which  it  is  issued.  But  when  the  nation  itself 
takes  part  in  the  administration  of  its  affairs,  although 
the  principles  of  political  economy  may  not  be  fully 
known  or  understood,  natural  good-sense  and  the  prac- 
tical use  of  money  will  suffice  to  prevent  recourse  to 
operations,  the  inevitable  result  of  which  is  the  ruin  of 
the  state  and  of  individuals.  Thus,  until  the  introduc- 
tion of  the  system  of  representative  government  in  Eng- 
land, republics  were,  by  the  very  principle  of  their  con- 
stitution, far  better  secured  than  monarchies  against  the 
curse  of  the  adulteration  of  money.  When  this  evil  was 
rife  throughout  Europe,  in  the  Middle  Ages,  it  was  the 
merchant  republics,  like  Venice  and  Florence,  that  had 
the  surest  guaranties  against  it.  When  the  spirit  of 
liberty  prevailed,  even  in  states  which  had  a  monarchical 
constitution,  like  those  of  the  successors  of  Alexander, 
the  money  remained  good,  and  the  true  principles  of  a 
sound  currency  were  maintained.  Wherever  liberty  was 
lost,  these  principles  were  lost  sight  of,  and  the  coinage 


4  MONE  Y. 

was  tampered  with.  For  example,  at  Syracuse  (the  sil- 
ver coins  being  elsewhere  of  good  quality),  complete 
bankruptcy  was  brought  about  by  a  change  in  the  intrin- 
sic value  of  the  money  which  formed  the  basis  of  all 
reckoning ;  as  a  rule  in  the  history  of  nations,  bad 
money  will  be  found  to  bear  the  stamp  of  a  king  or 
tyrant.  The  kings  of  Persia  were  among  the  earliest  to 
begin  an  extensive  and  systematic  adulteration  of  specie. 
In  the  last  century  of  its  existence,  the  Persian  mon- 
archy, which  had  endeavored  to  realize  the  chimera  of 
the  double  standard,  persisted  in  seeking  to  maintain  a 
legal  value  for  gold  13^^  times  greater  than  that  of  silver, 
although  the  commercial  value  of  that  metal  had  fallen 
everywhere  at  least  11  per  cent.  Necessarily,  in  spite  of 
royal  ordinances,  there  followed  an  export  of  silver  to 
the  Hellenic  mart  in  such  quantities  that  at  the  time  of 
the  conquest  by  Alexander  it  had  disappeared  almost 
entirely  from  the  interior  provinces  of  the  empire,  where 
there  remained  only  gold,  greatly  depreciated  by  that 
fact,  though  still  retaining  its  nominal  value.  In  mat- 
ters of  finance  and  political  economy  one  mistake  leads 
to  another  by  an  almost  fatal  sequence,  and  there  are 
few  greater  errors  than  when  the  people  accept  unresist- 
ingly the  idea  that  the  royal  will  was  enough  to  give  to 
a  piece  of  metal,  bearing  his  signature,  a  value  which  it 
could  never  have  commanded  commercially  in  the  form 
of  a  mere  ingot.  Coined  money  in  circulation  should 
be  equal  in  real  value  as  metal  to  its  nominal  value  ;  the 
coining  and  stamping  are  only  a  service,  that  the  people 
may  be  sure,  without  the  trouble  of  weighing,  that,  in  a 
piece  of  money  bearing  the  official  stamp,  they  have  the 
same  quantity  of  fine  metal  as  in  a  piece  of  the  same 


MONEY,  5 

weight  as  the  usual  commercial  ingot.  Money,  briefly, 
should  he  a  real  marketable  article,  and  not  a  mere  con- 
ventional sign  of  arbitrary  and  uncertain  value. 

Money  superseded  barter,  because  by  barter  it  was  not 
always  possible  to  dispense  with  that  which  was  usless, 
and  by  barter  we  had  to  buy  at  the  time  of  selling. 
Money  fixed  a  price  to  merchandise,  and  could,  possess- 
ing a  real  value,  purchase,  at  any  time  and  anywhere, 
corresponding  value  in  other  commodities  to  those  given 
for  it.  The  ofificial  stamp,  the  substance  being  of  intrin- 
sic value,  is  an  outward  sign  of  this  intrinsic  value — hence 
its  utility  ;  and  it  is  only  by  giving  this  guaranty  that 
the  government  earns  the  right  to  enforce  by  law  the  ac- 
ceptance of  the  coinage  for  the  sum  it  represents  ;  a  right 
which  can  only  be  lawfully  maintained  when  the  govern- 
ment has  acted  with  perfect  fairness.  No  government 
has  a  right  to  adulterate  the  public  money,  justifying 
their  conduct  by  the  sophism  that  the  value  of  the  coin 
is  derived  from  their  own  sacred  impress  affixed  to  it,  or 
to  restrict  the  operation  of  the  Currency  Act.  After  the 
suspension  of  cash  payments,  1797,  until  Peel's  Act  of 
1844,  the  directors  of  the  Bank  of  England  could  issue 
what  notes  they  liked  ;  and  the  same  power  was  given 
by  the  government  when  they  suspended  the  act  in  1847, 
1857,  1866.  The  principles  of  the  act  are  sound  or  un- 
sound ;  if  sound,  it  must  not  be  tampered  with  ;  if  un- 
sound, let  it  be  altered.  No  government  has  the  right  to 
assign  temporarily  or  otherwise  an  arbitrary  or  conven- 
tional value  to  money.  Nothing  is  more  dangerous  to  a 
nation  than  to  begin  to  tamper  with  money.  It  is  a 
course  in  which,  after  the  first  step  is  taken,  it  becomes 
impossible  to  stop.     You  may  argue  that  the  deteriora- 


6  MONEY. 

tion  of  the  coinage  or  suspending  the  Bank  Act  is 
adopted  as  a  last  resource,  and  that  in  such  times  of 
pressure  any  means  are  lawful  to  avert  the  catastrophe. 
An  action  may  be  lawful,  yet  neither  be  wise  nor  right, 
and  all  such  actions  are,  in  my  opinion,  alike  wrong  and 
unnecessary.  The  proper  action  is  to  find  the  cause  of 
the  mischief,  and  remove  it  ;  and  not  extend  and 
strengthen  the  belief  in  the  theory  of  the  money-sign 
doctrine,  that  a  legislative  decision  is  sufficient  to  attach 
to  metallic  specie,  or  bank  notes,  an  arbitrary  and  ficti- 
tious value  ;  and  so  carry  forward  the  dangerous  doctrine 
that  the  state  has  a  right  to  seek  relief  from  financial 
pressure  by  that  robbery,  or  forced  loan,  implied  in  every 
depreciation  of  the  coinage.  The  right  of  the  state  to 
fix  arbitrarily  the  value  of  money,  is  to  affirm  the  right  of 
a  government  to  adulterate  at  pleasure.  That  the  stamp 
alone  of  a  government  is  to  give  the  value  to  coinage  is 
equivalent  to  stating  that  the  value  of  money  is  arbitrary, 
and  depends  on  the  will  of  the  sovereign  who  issues  it  : 
a  most  dangerous  doctrine,  intended  to  guarantee  the  in- 
tegrity of  the  coinage,  but  calculated  to  encourage  and 
foster  the  temptations  to  abuse  it.  It  is  a  false  principle, 
similar  to  that  of  a  man  deeply  in  debt  being  enabled  by 
permission  of  the  law  to  pay  his  liabilities  nominally  in 
full,  but  actually  only  a  composition  upon  the  amount  he 
owes. 

Cicero  tells  us  that  in  the  time  of  Cinna  the  value  of 
the  Roman  coinage  had  become  so  dubious  that  no  one 
knew  precisely  what  it  was  worth  ;  and  so  in  the  year  of 
Rome,  670  (b.c.  84),  the  tribunes  of  the  people  and  the 
praetors  deliberated  on  the  measures  to  be  taken  in  order 
to  remedy  this  depressing  state  of  things.     An  edict  of 


MONE  V.  7 

the  praetor,  M.  Marius  Gratidianus,  instituted  officers  for 
the  verification  of  the  coinage,  suppressed  the  enforced 
circulation  of  the  plated  denarii,  ordered  that  they  should 
be  withdrawn  from  the  public  coffers,  and  that  denarii  of 
a  true  standard  should  be  given  in  exchange.  The  popu- 
lar enthusiasm  with  which  this  act  was  received  gives 
some  idea  of  the  gravity  of  the  evil  to  which  it  brought 
redress.  Statues  were  raised  in  all  the  public  places  to 
the  praetor  who  had  taken  the  initiative  in  so  beneficent 
a  reform,  and  almost  divine  honors  were  paid  to  these 
statues  by  burning  incense  and  wax  tapers  before  them. 
The  Romans  were  right  ;  no  man  is  more  worthy  of  a 
people's  homage  than  he  who  dares  brave  the  selfish 
interests  of  the  few,  that  right  may  be  done  to  the  many. 
In  reading  ancient  history,  there  is  no  better  test  of  the 
character  of  the  emperor  than  the  more  or  less  sound 
ring  of  the  coins  struck  during  his  reign  ;  and  at  all 
times  it  is  an  infallible  test  of  a  man's  character,  this 
money-test  ;  there  is  no  surer  indication,  whether  the  in- 
dividual worships  God  or  Mammon.  The  man  who  of- 
fends his  God  by  not  being  equal  to  adhering  strictly  to 
right,  and  allows  the  temptation  of  a  pecuniary  gain  to 
make  him  swerve  from  the  dictates  of  his  conscience, 
has  given  proof  by  the  most  unmistakable  sign  that  he  is 
a  slave  of  Mammon,  and  will  barter  his  soul,  sell  his 
manhood,  for  a  mess  of  pottage.  There  is  no  more 
infallible  sign  of  the  weakness,  the  insignificance,  of  the 
individual  than  this  degrading  servility  to  greed,  as  it  in- 
dicates a  man  who  will  barter  his  soul,  sell  himself,  for 
money  ;  and  his  gradual  descent  from  high  resolves  may 
be  traced  as  this  desire,  this  one  vice  of  avarice,  gets 
possession  of  his  soul.     So  also  there  is  no  more  infallible 


8  MONE  Y. 

symptom  of  the  decay  of  a  state  than  the  corruption  of 
the  coinage,  and  the  steps  of  this  decline  are  marked  by 
the  successive  depreciation  of  the  money.  Such  action 
indicates  a  low  morality,  as  in  modern  times  relying  for 
relief  on  the  "  suspension  "  of  the  acts  upon  which  the 
nation's  currency,  "  money,"  is  based,  indicates  a  want  of 
education,  a  want  of  intelligence. 

You  will  best  realize  the  value  of  "honest  "  money  by 
considering  the  following  picture,  drawn  by  Francois 
Lenormant,  in  the  Contemporary  Review  for  February, 
1879.  After  proving  that  the  false  theory  of  the  essence 
and  origin  of  money  had  become  embodied  in  the  laws 
and  firmly  rooted  in  the  minds  of  men,  he  says  : 

"  The  reigning  princes  made  more  or  less  use  of  it  in 
proportion  to  their  unscrupulousness  and  cupidity.  The 
true  and  sound  theory,  always  known  and  practised 
among  the  Greeks,  had  fallen  into  a  complete  oblivion 
through  a  long  course  of  ages,  and  the  fatal  error,  which 
was  the  economic  course  of  the  Roman  Empire,  was 
transmitted  to  the  Middle  Ages,  and  became  the  source 
of  widespread  misery.  Let  us  call  to  mind  the  disastrous 
consequences,  in  the  young  Christian  societies  of  the 
west,  of  the  doctrine  borrowed  from  the  empire  of  the 
Caesars,  that  money  was  simply  a  sign,  owing  all  its  value 
to  its  official  impress.  The  infinite  diversity  of  petty 
powers  during  the  feudal  period  added  to  the  confusion 
which  had  prevailed  even  under  the  empire.  Each  feudal 
lord  struck  some  coin,  and  every  monarch  made  some 
change,  greater  or  less,  in  the  currency,  in  order  to 
disguise  his  actual  bankruptcy.  It  was  required  that 
payment  to  government  should  be  made  quarterly  or 
monthly  in  the  current  coin,  and  according  as  the  prince 


MONE  V.  9 

was  debtor  or  creditor  he  lowered  or  raised  the  monetary 
standard.  These  nefarious  proceedings  failed  in  their 
end  ;  the  bad  money,  following  an  inexorable  law,  drove 
out  the  good,  and,  after  perplexing  and  mischievously 
oscillating,  the  value  of  things  was  adjusted  to  the  de- 
pressed money  standard.  Hence  ensued  the  disappear- 
ance of  the  good  money  and  the  rise  of  prices — evils 
which  it  was  sought  to  remedy  by  prohibiting  exporta- 
tion, and  fixing  a  maximum  for  prices — measures  as 
unavailing  as  they  were  obnoxious. 

"  Errors,  frauds,  and  deeds  of  violence  followed  each 
other  in  fatal  succession,  always  leaving  behind  the  same 
result — corrupted  morals  and  commercial  panic.  The 
periodical  depreciation  of  the  money  caused  universal 
confusion  ;  the  morbus  numericus,  which  was  described  as 
no  less  fatal  than  the  plague  itself,  visited  every  country. 
Spain,  Portugal,  England,  the  Empire  of  Hungary,  Bo- 
hemia, Naples,  Savoy,  suffered  from  it  no  less  than 
France.  Everywhere  the  old  imperial  idea  of  the  ar- 
bitrary value  of  money  depending  on  the  will  of  the 
sovereign  was  hailed  by  unscrupulous  governments, 
anxious  to  use  it  for  tlieir  own  advantage. 

"  It  was  vain  for  religion  to  thunder  against  these 
abuses  through  the  popes  and  bishops,  who  were  not 
always  themselves  exempt  from  the  same  fault  ;  it  was 
vain  for  poetry  to  borrow  the  pen  of  Dante  to  brand 
Philippe  le  Bel  as  a  forger  : 

"  '  Li  si  vedra  il  duol  che  sopra  Senna, 
Induce,  falseggiando  la  nioneta.' 

"  The  world  continued  to  suffer  from  an  evil,  the  true 
nature  of  which   it  failed   to   recognize.     The  angel  of 


lO  MONEY. 

the  school,  the  great  Thomas  Aquinas  himself,  although, 
following  in  the  footsteps  of  Aristotle,  he  enunciated  the 
true  principles  of  money,  contented  himself  with  coun- 
selling the  sovereigns  to  make  '  a  moderate  use '  of  the 
monopoly  of  the  money, '  Sive  in  mutando,  sive  in  dimin- 
uendo pondus.'  " 

Throughout  the  whole  of  the  Middle  Ages  we  find 
only  one  man  who,  by  an  effort  of  good  sense,  amounting 
to  genius,  and  peculiarly  admirable  in  the  midst  of  the 
prevailing  errors  of  the  time,  perceived  the  true  bases  of 
the  monetary  theory.  This  was  Nicholas  Oresme,  Bishop 
of  Lisieux,  whose  name  was  rescued  a  few  years  ago  by 
M.  Wolowski  and  Roscher  from  the  unjust  oblivion  of 
five  hundred  years,  and  whom  they  have  rightly  declared 
to  be  a  great  economist  and  the  precursor  of  the  deepest 
researches  of  modern  science  in  this  department.  But 
the  wise  teachings  and  the  efforts  of  Nicholas  Oresme 
had  no  result  beyond  the  reign  of  his  friend,  Charles  V., 
to  whom  popular  gratitude  has  awarded  the  surname  of 
"  The  Wise."  After  the  death  of  this  prince,  the  truths 
which  the  prelate  economist  had  brought  again  into  the 
light  were  soon  forgotten.  The  tampering  with  the 
money  was  resumed,  practised  perhaps  with  a  little  less 
folly  and  at  rarer  intervals  than  in  the  fourteenth  century, 
but  still  practised. 

It  was  not  till  the  sixteenth  and  seventeenth  centuries 
that  thoughtful  and  courageous  men,  in  Italy  and  in 
England,  began  to  demonstrate  again  the  fallacy  of  the 
doctrine  which  attributed  the  value  of  money  to  the 
sovereign  power  ;  and  in  France  it  was  not  till  the  Con- 
stitutional Assembly  of  1789,  and  the  renaissance  of 
economic   science,  that  this  doctrine  disappeared  from 


MONE  V.  I  I 

theory  and  practice,  and  a  monetary  system  was  estab- 
lished based  upon  true  principles,  upon  the  notion  that  a 
sound  coinage  ought  to  have  a  real  value  as  merchandise, 
corresponding  to  the  nominal  value  for  which  it  is  current. 
Such  has  been  the  fatal  heritage  of  calamity  and  con- 
fusion handed  down  to  the  world  for  many  ages  by  an 
error  of  political  economy,  the  direct  offspring  of  despot- 
ism.   In  casting  a  rapid  glance  over  the  monetary  history 
of  antiquity,  we  see  this  great  truth  brought  out  on  every 
page,  that  in  order  to  have  sound  finances,  true  money, 
and  a  good  government,  the  first  conditions  are  liberty, 
the  right  of  control  and  of  discussion  ;  that  despotism,  if 
it  seems  sometimes  a  reparative  agent,  and  holds  out  fair 
promises  to  material  interests  which  may  have  been  im- 
perilled in  the  storms  of  liberty,  never  brings  more  than 
a  temporary  relief,  and  inevitably  drags  a  nation  down 
to  ruin,  by  working  on  false  economic  principles.     All 
human   science  ought   to  have  its   moral  teaching.     If 
the  study  of  numismatics  should  have  no  other  results 
than  to  confirm  by  irrefragable  evidence  this  important 
lesson,  it  would  deserve  a  high  place  in  the  category  of 
those  erudite  labors  by  which  we  recover  the  archive  of 
man's    mental    and    moral    history.      M.    Wolowski,    an 
eminent  French  economist,  has  briefly  said  :  "  The  per- 
manent hostility  of  nations,  commercial  crises,  the  depre- 
ciation of  specie,  covert  bankruptcies,  assignats,  paper 
money,  hatred  of  capital,  chimerical  schemes  of  financial 
renovation,  such  are  the  dire  consequences  of  false  views 
on  the  subject  of  money." 

Money  is  a  potent  power  in  the  hands  of  the  wise.  It 
is  not  plenty  of  the  "  circulating  medium  "  that  enriches 
a  people,  but  the  use  they  make  of  it.     It  is  our  duty,  as 


1 2  MONE  Y. 

it  is  for  our  interest,  to  study  and  understand  "  what  is 
money,"  so  as  to  derive  from  it  all  the  benefit  that  can  be 
obtained  by  its  use.  Not  to  think  of  it  in  the  sense  that 
Hesiod  wrote,  that  "  money  is  life  to  us  wretched  mor- 
tals "  ;  but  to  recognize,  with  Carlyle,  that  it  is  "  the 
pineal  flame  of  the  body  social."  Money  is  the  great 
wheel  of  circulation  and  distribution, — the  great  instru- 
ment of  commerce, — the  medium  through  which  the 
debts,  the  wages,  the  incomes  of  the  different  members 
of  the  community  are  distributed  to  them,  exchanges  are 
effected  by  them,  and  the  measure  by  which  they  esti- 
mate their  possessions. 

"  He  who  knows,  like  St.  Paul,  both  how  to  spare  and 
how  to  abound,  has  a  great  knowledge  ;  for  if  we  take 
account  of  all  the  virtues  with  which  money  is  mixed 
up — honesty,  justice,  generosity,  charity,  frugality,  fore- 
thought, self-sacrifice — and  of  their  correlative  vices,  it 
is  a  knowledge  which  goes  near  to  cover  the  length  and 
breadth  of  humanity  ;  and  a  right  measure  and  manner 
of  getting,  saving,  spending,  giving,  taking,  lending,  bor- 
rowing, and  bequeathing  would  almost  argue  a  perfect 
man.  ...  It  behoves  him  who  is  getting  money,  even 
more  than  him  who  has  it  by  inheritance,  to  bear  in  mind 
what  are  the  uses  of  money,  and  what  are  the  proportions 
and  properties  to  be  observed  in  saving,  giving,  and  spend- 
ing ;  for  rectitude  in  the  management  of  money  consists 
in  the  symmetry  of  these  three  "  (Sir  Henry  Taylor). 

"  Can  gold  calm  passion,  or  make  reason  thine  ? 
Can  we  dig  peace  or  wisdom  from  the  mine  ? 
Wisdom  to  gold  prefer,  for  't  is  much  less 
To  make  our  fortune  than  our  happiness. 
Nay,  more  than  this,  I  can  most  truly  state, 
The  happy  only  are  the  truly  great." 


THE   ORIGIN  OF  MONEY.  1 3 

THE  ORIGIN  OF  MONEY. 

To  the   Greeks  we   owe,  if  not   the   invention,  at  all 
events  the  very  general  extension  of  a  circulating  me- 
dium  in   the   form   of  coin,  and  on  their  coins  of  the 
very  earliest  period  we  find  records  of  the  migrations, 
the  mythology,  and  the  manners  and  state  of  civilization 
of  this  great  and  interesting  people.     At  a  later  period, 
it  became  customary  in  Greece  to  place  the  name  of  the 
chief  magistrate  for  the  tin>e  being  on  the  public  money, 
and  this  is  still  the  general  practice.     The  coins  of  the 
Greek  colonies   of    Italy,    Sicily,  Spain,    and   Gaul  also 
offer   an   endless   variety  of  interesting  illustrations   of 
history,  biography,  and  the  progress  of  the  arts  ;  but  the 
Roman  series  which  rose,  as  it  were,  on  the  ruins  of  that 
of  Greece,  are  of  the  highest  historical  importance  and 
interest.    Addison,  in  his  entertaining  dialogues  on  coins, 
on  which   Pope   wrote  his  well-known  poem,  calls  the 
Roman  coinage  a  sort  of  "  State  Gazette,"  on  which  all 
the  truly   great  events  of  the  empire  were  periodically 
published  ;    and  when  we  find  such  announcements  as 
Egypta  Capta  on  coins  of  Augustus,  struck  on  the  con- 
quest of   Egypt,    yudea    Capta  on  those  of  Vespasian, 
issued  when  Judea  was  finally  subjugated  to  the  Roman 
yoke,  or  "Rex  parthis  datus  "  on  the  coins  of  Trajan, 
when  the  Roman  emperor  gave  a  king  to  the  Parthians, 
we  must  allow  the  aptness  of  the  term. 

The  modern  series  consists  of  Anglo-Saxon,  Anglo- 
Norman,  and  English  coins,  and  is  perhaps  more  perfect 
and  complete  than  that  of  any  other  state  ;  and  exhibits 
every  stage  of  development,  from  the  rude  Saxon  penny 
of  Elizabeth  to  the  great  coinage  of  gold  nobles  in  the 
flourishing  part   of  the    reign  of  Edward  the  Third,  as 


14  MONEY. 

well  as  the  links  of  all  subsequent  progress.  The  event- 
ful reign  of  Charles  the  First  might  be  exhibited  very 
graphically  in  a  small  cabinet  of  his  coins — the  rude 
"  siege  pieces,"  struck  without  coining  apparatus  in  dif- 
ferent parts  of  the  kingdom  whither  fluctuating  fortunes 
drove  the  unfortunate  prince,  serving  as  monuments  of 
almost  each  disaster  or  temporary  triumph  ;  among 
which  not  the  least  remarkable  are  the  great  twenty- 
shilling  pieces  of  silver  coined  at  Oxford,  from  the  plate 
given  up  by  the  heads  of  colleges  to  be  melted  down  and 
coined  for  the  royal  cause  ;  in  which  processes  perished 
some  of  the  noblest  specimens  of  the  exquisite  skill  of 
our  early  silversmiths  and  goldsmiths,  the  loss  of  which 
will  never  cease  to  be  regretted  by  all  true  lovers  of  art. 
("  Humphrey's  Coin  Collectors'  Manual.")  The  Assy- 
rians invented  letters  of  credit.  The  Hebrews  had  no 
coins  until  the  time  of  Simon  the  Maccabee,  144  to  145 
B.  c.  The  earlier  mention  of  pieces  of  silver  should  be 
shekels  in  the  sense  of  a  weight,  not  a  coin  ;  and  the 
earliest  mention  of  true  coins  in  the  Bible  refers  to  Per- 
sian money,  the  word  drachm  being  a  mistake  for  "  daric." 
Throughout  the  early  part  of  Scripture,  as  well  as 
through  the  poems  of  Homer,  not  a  single  passage  occurs 
from  which  we  can  infer  either  the  use  or  the  existence 
of  stamped  money.  Metals,  however,  being  close  and 
compact  in  form,  universal  as  to  use,  and  admitting  of 
division  into  larger  and  smaller  parts,  must  soon  have 
become  the  representative  of  value.  Herodotus  (i.  94), 
speaking  of  the  Lydians,  says  they  were  the  first  people 
on  record  who  coined  gold  and  silver  into  money,  which 
only  means  the  first  people  that  he  had  heard  of.  The 
Parian  Chronicle  ascribes  the   origin   of  money  to  the 


THE   ORIGIN   OF  MONEY.  1 5 

-^ginetans,  under  Pheidon,  King  of  Argos,  895  years 
before  Christ.  The  best  numismatic  antiquaries  agree  in 
considering  the  coins  of  ^gina,  from  their  archaic  form 
and  appearance,  as  the  most  ancient  known.  They  are 
of  silver,  and  bear  on  the  upper  side  the  figure  of  a 
turtle,  and  on  the  other  an  indented  mark,  as  if  the 
metal,  at  the  time  of  striking,  had  been  fixed  upon  a 
puncheon,  and  from  the  weight  of  the  blow  had  received 
a  deep  cleft.  In  later  coins  of  .^gina  the  turtle  has  been 
changed  to  a  tortoise,  and  the  fissure  on  the  other  side 
converted  into  a  device.  The  coins  of  Lydia  probably 
come  ne.xt  in  point  of  antiquity,  and  then  the  early 
darics  of  the  Persian  king,  which  occur  both  in  gold  and 
silver,  and  bear  a  strong  resemblance  to  the  coins  of 
.^gina  in  the  mode  of  striking  ;  these,  if  they  are  to  be 
referred  to  Darius  the  First,  must  have  been  coined  be- 
tween B.C.  522  and  486.  There  are  coins  in  gold  of  the 
early  kings  of  Persia,  similar  in  type  to  the  silver  darics, 
and  of  very  minute  size.    ("  National  Cyclopaedia.") 

English  coins,  pennies,  halfpennies,  and  farthings, 
in  silver  and  brass,  coined  by  the  Anglo-Saxon  and 
Anglo-Danish  kings,  are  very  numerously  possessed. 
Similar  coins,  struck  by  the  Norman  and  early  Plan- 
tagenet  kings,  and  by  the  nobles,  bishops,  and  other 
authorities,  still  exist.  In  the  reigns  of  the  later  Plan- 
tagenets  groats  and  half-groats  were  coined  ;  and  gold 
coins,  in  value  equal  to  18  groats,  called  florins,  with 
half  and  quarter  florins.  Before  this  time  gold  had  been 
but  little  used  for  English  coin,  and  had  borne  no  dis- 
tinct name.  The  noble,  whose  value  is  yet  preserved  in 
the  well-known  legal  fee  of  6x.  8</.,  supplanted  the  florin, 
and  was  displaced  in  the  time  of  the  Yorkists  by  the 


1 6  MONE  V. 

angels  (equal  to  it  in  value),  the  half-angels,  and  the 
vials,  equal  in  value  to  30  groats.  The  accession  of  the 
Tudors  introduced  new  coins  ;  in  silver  came  the  crown, 
half-crown,  shilling,  sixpence,  and  its  half,  quarter,  and 
eighth  parts  ;  in  gold,  the  sovereign,  and  double  sovereign, 
crown,  half-crown,  and  noble.  With  the  Stuarts  were  in- 
troduced guineas,  half-guineas,  and  two-  and  five-guinea 
pieces  in  gold,  with  halfpence  and  farthings  in  tin  and 
copper.  Quarter-guineas  in  gold  were  struck  in  the  ear- 
lier reign  of  the  present  house.  Copper  pence  and  two- 
penny pieces,  and  seven-shilling  gold  pieces,  were  issued 
by  George  III.  At  the  end  of  the  war  our  present  coin- 
age was  introduced,  excepting  four-penny  pieces,  which 
were  struck  by  William  IV.  in  silver,  and  threepenny 
pieces,  in  silver,  and  the  farthing,  in  copper,  by  our 
present  monarch.  Double  sovereigns  and  five-sovereign 
pieces  were  struck  in  gold,  but  are  not  in  general  circu- 
lation, and  twopenny,  penny,  halfpenny,  and  penny  pieces 
in  silver  also,  which  are  usually  called  Maunday-pence, 
from  an  ancient  custom  of  giving  these  and  other  small 
silver  coins  as  alms  on  Maunday  Thursday  at  the  Royal 
Palace.  It  must  not  be  supposed  that  the  value  of  these 
coins  continued  the  same,  as  the  sameness  of  the  name 
would  seem  to  imply.  The  worth  of  metallic  money 
always  depends  upon  circumstances  which  no  legislature 
can  control,  and  as  it  can  always  be  converted  into  bul- 
lion, no  laws  can  keep  it  at  a  fictitious  value.  ("  Bar- 
clay's Dictionary.") 

Abraham's  purchase  for  four  hundred  shekels  of  silver, 
"current  money  with  the  merchant,"  of  the  field  and 
cave  of  Machpelah  as  a  burial-place  for  Sara,  is  almost 
the  earliest  instance  on  record  of  a  money  transaction. 


THE   ORIGIN  OF  MONEY.  1 7 

In  the  same  Book  of  Genesis  we  read  that  Joseph's 
brethren,  when  they  went  into  Egypt  to  buy  corn,  found 
their  money  returned  to  them  in  their  sacks,  "  each  man's 
money  in  the  mouth  of  his  sack  in  full  weight."  This  is 
worthy  of  remark,  as  indicating  that  in  that  early  age  it 
was  not  only  the  habit  to  count  money,  as  to  the  number 
of  pieces,  but  to  take  cognizance  of  its  weight.  The  fact 
of  their  counting  as  well  as  weighing  is  apparent  from 
another  chapter,  where  we  are  told  that  Joseph,  when  he 
sent  his  brethren  for  their  father,  made  presents  to  them 
of  changes  of  raiment,  "but  to  Benjamin  he  gave  three 
hundred  pieces  of  silver."  Thus  early  in  the  history  of 
the  patriarchal  dispensation  we  find  that  a  silver  cur- 
rency, guarded  both  by  talc  and  by  weight,  was  in  ordi- 
nary use  ;  so  it  is  probable  that  trade,  as  we  now  under- 
stand the  term,  was  even  then — nearly  two  thousand 
years  before  the  time  of  Christ — an  old  institution.  Mere 
barter  of  one  commodity  for  another,  which  marks  the 
transition  of  each  nation  or  group  of  men  from  barbarism 
and  theft  to  civilization  and  commerce,  had  been  super- 
seded in  those  earliest  communities  that  arose  in  the 
garden  land  of  the  world.  While  Abraham's  ancestors 
were  leading  a  pastoral  life  in  Ur  of  the  Chaldees,  their 
neighbors  of  the  Aryan  stock  were  building  cities  and 
developing  commerce  in  Persia  and  India,  and  the  patient 
settlers  on  the  banks  of  the  Nile  were  making  Egypt  a 
granary  for  all  the  nations.  Abraham,  "  very  rich  in 
cattle,  in  silver,  and  in  gold,"  going  down  to  sojourn  in 
Egypt,  with  his  flocks  and  herds  and  tents,  because  there 
was  a  grievous  famine  in  Canaan,  only  did  what  other 
fathers  of  nations  often  had  to  do  in  times  when  it  was 
easier  for  men  to  travel  hundreds  of  miles  in  search  of 


1 8  MONEY. 

food  than  to  wait  until  the  food  was  brought  to  them.  It 
was  so  two  centuries  later,  when  Jacob  and  his  family 
went  to  settle  in  the  land  of  Goshen  ;  and  the  history  of 
Jacob's  son — Joseph,  first  a  slave,  then  Potiphar's  clerk, 
then  Pharaoh's  prime-minister — is  the  earliest  biography 
extant  of  a  great  merchant  prince.  The  industry  and 
shrewdness,  the  skill  in  turning  all  things  to  his  profit, 
and  the  fidelity  to  his  own  race  which  Joseph  displayed, 
have  been  the  inheritance  of  the  Jews,  and  the  main 
source  of  their  commercial  success  during  the  past  five 
and  thirty  centuries.  ("  The  Romance  of  Trade,"  by 
H.  R.  Fox  Bourne.) 

The  value  of  money  consists  in  its  utility  as  the  best 
medium  of  exchange  to  be  had.  It  is  by  labor  that  all 
things  valuable  to  mankind  are  produced,  and  it  is  by 
exchange  alone  that  individuals  are  enabled  to  partake 
of  a  great  variety  of  commodities  which  their  own  labor 
could  never,  by  any  possibility,  have  commanded  with- 
out it.  In  an  advanced  state  of  society,  the  food,  cloth- 
ing, habitations,  in  ordinary  use  amongst  all  classes  of 
men,  are  composed  of  immense  numbers  of  ingredients 
the  result  of  the  industry  of  individuals  scattered  over 
the  face  of  half  the  globe.  It  is  evident,  therefore,  that 
if  each  person  could  obtain  nothing  but  what  was  pro- 
duced by  the  labor  of  his  own  hands,  or  be  exchanged 
by  the  old  system  of  barter,  mankind  never  could  have 
emerged  from  a  state  of  the  rudest  ignorance  and  bar- 
barism ;  and  by  its  system  of  "  currency  "  we  have  a 
sure  indication  of  a  nation's  intelligence.  The  first  use 
of  money  marks  an  epoch  in  the  history  of  commerce, 
was  indeed  the  beginning  of  commerce,  as  in  all  its  sub- 
sequent stages  it  has  served  as  its  pivot  or  fulcrum.   The 


THE   ORIGIN  OF  MONEY.  I9 

banker's  calling  began  almost  with  the  beginning  of 
society.  No  sooner  had  men  learnt  to  adopt  a  portable 
and  artificial  equivalent  for  their  commodities,  and  thus 
to  buy  and  sell  and  get  gain  more  easily,  than  the  more 
careful  of  them  began  to  gather  up  their  money  in  little 
heaps,  and  great  heaps,  if  they  were  fortunate  enough. 
These  heaps  were  by  the  Romans  called  moutcs — mounds, 
or  banks — and  henceforth  every  money-maker  was  a 
primitive  banker.  When  and  in  what  precise  way  the 
great  advantage  of  joint-stock  heaping  up  of  money  was 
discovered  antiquaries  have  yet  to  decide.  It  is  enough 
for  us  to  know  that  everywhere,  as  soon  as  commerce 
and  patriotism  had  engendered  enough  felloAv-feeling 
and  community  of  interest  among  groups  of  men  and 
sections  of  society,  banking  began  to  pass  out  of  its  first 
rude  stage  and  to  advance  towards  the  condition  in 
which  we  now  find  it  ;  and  by  giving  the  subject  the 
necessary  thought,  our  banking  system,  with  the  prin- 
ciple of  the  Currency  Act  judiciously  enlarged,  is  quite 
able  to  meet  the  needs  of  an  increasing  commerce. 
Bankers  or  money-changers'  tables  were  famous  institu- 
tions all  over  the  civilized  world  of  the  ancients.  Livy 
tells  how,  in  308  B.C.,  if  not  before,  they  were  to  be 
found  in  the  Roman  forum,  and  later  Latin  authors 
make  frequent  allusions  to  banking  transactions  of  all 
sorts.  They  talk  of  deposits  and  securities,  bills  of  ex- 
change and  drafts  to  order,  cheques  and  bankers'  books, 
as  glibly  as  a  modern  merchant.  But  these  things  were 
nearly  forgotten  during  the  dark  ages,  until  the  Jews, 
true  to  the  money-making  propensities  that  character- 
ized them  while  they  still  had  a  country  of  their  own, 
set  the  ''ashion  of  money-making  and  of  banking  in  all 


20  MONE  Y. 

the  countries  of  Europe  through  which  they  were  dis- 
persed. Their  first  customers  and  their  first  disciples 
were  the  Italian  merchants  who  made  Venice,  Florence, 
and  Genoa  great  during  the  Middle  Ages.  In  England, 
under  the  Plantagenets — it  was  the  same  in  all  the 
mediaeval  states  of  continental  Europe, —  Jews  and 
Italians  settled  themselves  as  traders  in  every  thing,  but 
especially  in  money,  wherever  any  sort  of  fruitful  com- 
merce was  carried  on.  The  kings  of  England  used 
them  as  cashiers,  pawnbrokers,  and  the  like,  until  their 
own  subjects  were  sufficiently  trained  in  monetary  arts 
to  take  their  place  ;  and  the  royal  examples  were  fol- 
lowed by  all  manner  of  folk  who  had  need  of  gold,  and 
credit  enough  to  obtain  it.  Old  Jewry  and  Lombard 
Street  marked  the  districts  in  London  that  were  fre- 
quented by  these  foreigners  between  the  twelfth  and 
fifteenth  centuries. 

The  Jews  and  Lombards  in  England,  however,  were 
only  bankers  in  the  sense  of  money-lenders  ;  and  the 
Englishmen  who  succeeded  them  were  of  the  same 
character  down  to  the  seventeenth  century.  What  Sir 
William  de  la  Pole  was  to  Edward  III.  Sir  Richard 
Whittington  was  to  Henry  IV.  and  Henry.  V.,  and 
Sir  Thomas  Gresham  to  Edward  VI.  and  Queen 
Elizabeth  ;  and  these  famous  men  were  only  represen- 
tatives of  an  irregular  class  of  bankers,  who  enriched 
themselves  and  added  greatly  to  the  wealth  and  welfare 
of  England  during  a  dozen  generations.  All  merchants 
were  then  to  some  extent  bankers,  but  the  trade  of 
banking  in  its  primitive  condition  was  especially  a  part  of 
the  goldsmith's  calling.  This  Avas  only  natural  when  gold 
was  money  much  more  exclusively  than  it  is  now.     The 


THE   ORIGIN  OF  MONEY.  21 

banking  occupation  of  the  goldsmith  was  unintentionally 
introduced  by  Charles  I.,  who,  when  sorely  in  need  of 
funds  with  which  to  raise  an  army  against  the  rebellious 
Scots,  took  possession  of  about  ^200,000,  lodged  by  the 
merchants  of  London  in  the  Royal  Mint  as  a  place  of 
safe  custody.  From  that  time  the  Mint  ceased  to  be 
employed  as  a  bank  of  deposit  ;  but  the  troubled  state 
of  the  country,  just  entered  upon  civil  war,  rendered 
something  of  the  sort  more  necessary  than  ever.  The 
example  of  one  pr  two  who  entrusted  their  savings  to  the 
goldsmiths,  accustomed  to  the  guardianship  of  large 
amounts  of  treasure,  was  quickly  followed  by  others. 
This  new  arrangement  found  favor  more  rapidly  through 
the  willingness  of  the  goldsmiths  to  pay  interest  for  the 
money  placed  in  their  hands  ;  and  long  before  the  time 
of  the  Restoration  they  found  themselves  placed  in  a 
position  very  similar  to  that  of  a  private  banker  of  the 
present  day  ;  some  of  them,  indeed,  were  actually 
founders  of  banking  houses  that  now  exist.  William 
Wheeler,  one  of  the  number,  left  his  shop  in  Fleet  Street, 
next  door  to  Temple  Bar,  to  his  son-in-law,  Francis 
Child,  known — probably  because  he  was  the  first  to 
tlirow  aside  the  goldsmith's  trade,  and  make  banking 
his  only  business — as  "the  father  of  the  profession,"  and 
the  same  site  was  occupied  till  recently  by  the  establish- 
ment which  he  made  famous.  James  Hore,  or  Hoare, 
who  settled  first  in  Cheapside,  and  afterwards  in  Fleet 
Street,  was,  in  like  manner,  the  builder-up  of  the  business 
that  yet  bears  his  name.  (For  further  details  of  bank- 
ing, etc.,  the  reader  is  referred  to  "  The  Romance  of 
Trade,"  by  H.  R.  Fox  Bourne.)  The  goldsmiths  gave 
paper  bonds   for  the  vast  sums  of  money  that  they  re- 


22  MONE  Y. 

ceived,  just  as  they  had  been  in  the  habit  of  receiving 
paper  bonds  for  the  money  that  they  lent  ;  and  they 
soon  had  half  of  the  actual  coins  of  the  land  in  their 
keeping  ;  and  the  paper  equivalents  for  it,  issued  by 
them,  came  to  be  used  everywhere  as  money.  Thereby 
inordinate  power  was  placed  in  their  hands,  and  great 
risk  was  incurred  by  those  who  made  them  their  cash- 
keepers.  The  money  intrusted  to  them  was  often  lent 
out  by  them  at  high  rates  of  interest,  and  if  they  failed 
through  their  own  speculations,  their  clients  were  the 
chief  sufferers. 

To  lessen  this  danger,  and  provide  a  means  for  mer- 
chants to  lend  and  borrow  money,  the  Bank  of  England 
was  started  in  1694.  The  earliest  bank  was  that  of 
Barcelona,  founded  in  1401  ;  the  Bank  of  Venice  did 
not  receive  money  on  deposit  before  1587  ;  the  Bank  of 
Genoa  did  not  perform  genuine  banking  business  until 
1675.  Banks  were  opened  in  Amsterdam,  Hamburg, 
and  Rotterdam,  early  in  the  seventeenth  century,  in 
each  of  which  private  speculators,  in  return  for  special 
services  rendered  to  the  state,  in  lending  it  money  and 
collecting  its  revenues,  received  from  it  special  privi- 
leges and  protection  in  their  financial  relations  with  their 
fellow-citizens.  The  Bank  at  Amsterdam  was  prosper- 
ous when  William  III.  became  King  of  England,  and 
from  it  William  Paterson  to  a  great  extent  derived  the 
suggestions  which  he  offered  to  Parliament  in  1691.  To 
appreciate  at  its  proper  worth  the  wise  methods  of  bank- 
ing and  finance  Paterson  advocated,  we  must  recollect 
the  systems  of  public  borrowing  then  in  vogue.  "  When 
the  Treasury  was  empty,"  as  Macaulay  says,  "when  the 
taxes  came  in  slowly,  and  when  the  pay  of  soldiers  and 


THE   ORIGIN  OF  MONEY.  23 

sailors  was  in  arrear,  it  was  necessary  for  the  Chancellor 
of  the  Exchequer  to  go,  hat  in  hand,  up  and  down 
Cheapside  and  Cornhill,  attended  by  the  Lord  Mayor 
and  by  the  Aldermen,  to  make  up  a  sum  by  borrowing 
;^ioo  from  this  hosier,  ;^2oo  from  that  ironmonger  ; 
and  for  these  paltry  loans  he  had  to  pay  such  interest  as 
spendthrifts  now  pay  to  extortionate  Jews  upon  accom- 
modation bills."  In  1691  the  National  Debt  being  then 
a  new  thing,  Paterson  was  examined  before  the  House 
of  Commons  as  to  the  best  way  of  collecting  and  man- 
aging public  loans,  the  public  debt,  then  jC^t^^ooo.ooq, 
being  apparently  an  overwhelming  burden  to  the  coun- 
try. He  suggested  that  a  fixed  sum  of  _;^i, 000,000  at 
six  per  cent,  should  be  subscribed  by  a  corporation  of 
merchants,  and  converted  into  a  permanent  fund,  to  be 
employed  partly  in  meeting  the  pressing  claims  upon 
the  State,  and  partly  in  forming  a  public  bank,  "  to 
exchange  such  current  bills  as  should  be  brought  to  be 
exchanged,  the  better  to  give  credit  thereunto,  and  make 
the  said  bills  the  better  to  circulate."  The  suggestion 
was  demurred  to  by  Parliament,  the  old  struggling  ways 
of  borrowing  were  continued,  and  by  1694  the  debt  was 
thus  raised  from  ;^3,ooo,ooo  to  ^6,000,000,  and  the 
government  found  itself  in  such  embarrassment  that  it 
was  forced  to  adopt  Paterson's  project  substantially, 
though  not  quite  as  he  planned  it,  for  a  bank  of  Eng- 
land. 

In  1693  "  Mr.  Paterson  "  is  mentioned  in  the  journals 
of  the  House  of  Commons  as  appearing  before  a  com- 
mittee on  behalf  of  capitalists  of  London,  to  offer 
money  for  the  public  service  upon  parliamentary  secu- 
rity, with  the  new  condition,  that  their  bills,  payable  in 


24  MONEY. 

coin  on  demand,  should  be  made  transferable  without 
endorsement.  Herein  you  will  perceive  the  origin  of  the 
Bank  of  England  note — paper-money  representation  of 
gold,  paper  money  based  on  the  value  of  gold  ;  being 
payable  on  demand  in  coin,  transferable,  and  payable  to 
bearer.  At  the  present  day  we  can  judge,  by  the  spe- 
cious arguments  of  those  who  advocate /a/i?r  money,  the 
difficulty  Paterson  had  in  answering  by  his  tracts  the 
specious  writings  of  the  numerous  projectors  of  the 
many  wild  schemes  then  so  rampant,  who,  to  further 
their  own  ends,  boldly  advocated  a  government  paper 
money,  or  transferable  bills  not  payable  in  coin  on  demand. 
Paterson  in  1691  proposed  means  for  restoring  the  coin- 
age to  its  proper  standard  ;  but  his  advice  was  not 
taken,  and  ultimately  the  measures  adopted  on  that 
head  with  great  ability  by  Mr.  Montague,  afterward  Earl 
of  Halifax,  were  far  less  economical,  and  even  less 
effectual,  than  the  plan  proposed  by  Paterson.  On  that 
occasion,  in  1696,  the  Bank  of  England,  the  direction  of 
which  he  had  quitted,  was  compelled  by  mismanage- 
ment to  stop.  The  stopage  was  the  more  serious,  as  it 
took  place  pending  the  difficulty  respecting  the  coin  ; 
and  the  value  of  the  bank  notes  sustained  a  great  fall, 
since  the  credit  of  the  bank  itself  was  weakened.  From 
two  letters  (attributed  to  Paterson)  sent  to  Mr.  Locke 
against  lowering  the  standard  of  the  coin,  as  proposed 
to  the  Treasury  by  Mr.  Lowndes,  I  extract  the  following, 
as  being  of  universal  application  ;  and  as  they  also 
clearly  demonstrate  the  value  of  credit,  and  how  alone 
credit  is  to  be  obtained  and  maintained,  the  lesson  con- 
veyed is  no  less  applicable  in  1880  than  it  was  in  1696  : 
"  The  discredit  of  the  coin,  from  its  being  clipped  or 


THE   ORIGIN  OF  MONEY.  2$ 

worn,  and  the  discredit  of  the  bank  notes,  in  conse- 
quence of  the  refusal  of  payment  by  the  bank  in  gold 
coin  on  demand,  are  the  same  thing,  and  he  insists  that 
the  proprietors  of  the  bank,  and  the  directors,  have  only 
one  course  open  if  they  would  be  safe.  They  must  pay 
the  amount  of  their  notes  in  coin  on  demand,  what- 
ever it  might  cost  them." 

It  is  only  by  understanding  our  monetary  system  that 
we  can  realize  the  power  of  "credit."  Our  commercial 
system  is  based  upon  faith  ;  cheques,  bills,  notes,  are 
mere  bits  of  paper,  and  o\\\y  promises  to  pay  ;  yet  so  great 
is  the  power  of  "  credit,"  that  transactions  to  the  extent 
of  "  over  a  hundred  millions  "  weekly  are  transacted 
through  the  Clearing  House.  Gold  is  a  mere  pigmy,  as  a 
medium  of  exchange,  to  this  giant,  "paper,"  based  upon 
"credit."  Simply  by  system  and  faith,  in  conjunction 
with  banking,  this  institution  settles  the  exchanges,  the 
buying  and  selling,  to  this  enormous  amount,  without  the 
aid  of  a  single  metallic  coin, — merely  by  book-keeping, 
or  tra7jsfer  of  cheques,  the  debiting  or  crediting  of  A  or 
B.  Credit — few  know  its  power,  how  strong  it  is  ;  as  the 
air,  to  buoy  you  up  ;  how  slight  it  is,  as  a  mere  vapor  ; 
when  roughly  touched,  can  do  an  amount  of  mischief  of 
which  it  is  impossible  to  foretell  the  extent.  Mr.  Harvey 
says  :  "  Paper  money  is  the  money  of  civilization."  He 
is  right  ;  but  1  contend  we  have  already  in  operation  a 
paper  money,  "  cheques,"  doing  its  work  well,  and 
a  monetary  system,  based  on  reality,  that,  with  an  intelli- 
gent expansion,  is  quite  capable  to  meet  the  needs 
of  1880.  There  must  be  no  tampering  with  this  princi- 
ple ;  it  must  be  a  paper  binding  its  issuers  to  their  last 
penny  to  honor  it  on  demand  with  gold,  or  with  securi- 


26  MONE  Y. 

ties  or  produce  calculated  upon  the  value  of  gold.  It  is 
this  belief  that  has  made  bank  notes  so  useful  to  us,  and 
enables  "  cheques  "  to  take  the  place  of  coin.  Paper 
money,  unless  based  on  real  money,  is  like  a  bill  of 
exchange  from  a  doubtful  trader,  or  an  order  from  a  man 
in  bad  credit.  Prudent  men  leave  both  alone  ;  the  gain 
is  doubtful,  the  certainty  of  a  loss  at  some  period  is  inev- 
itable. For  paper  money  to  have  a  legal  security,  to 
have  the  value  of  real  money,  it  is  essential  that  the 
belief  exists  that  the  law  compels  that  it  shall  not  be 
issued  except  upon  a  money  basis  redeemable  in  gold,  or 
of  equal  value  to  gold,  on  demand.  Any  faltering  in 
payment  of  paper  diminishes  its  value  ;  it  has  become  a 
kind  of  clipped  coin,  and  no  security  can  restore  the 
apparent  value  but  the  confidence  of  the  nation  that  the 
note  will  at  all  times  and  anywhere  be  of  equal  value  to 
the  money  it  represents.  There  is  no  necessity  for  this 
metallic  guaranty  to  be  abolished,  as  our  commercial 
panics  do  not  arise  from  too  little  gold,  but  upon  the  too 
large  use  of  paper  bills  of  exchange,  that  have  got  into 
circulation  upon  the  representation  that  the  merchant 
has  consigned  goods  abroad  to  the  value  thereof,  or  that 
they  represent  a  debt  due  by  A  to  B  ;  and  the  value  in 
both  cases  not  being  real,  the  collapse  is  inevitable.  And 
I  have  failed  in  all  the  methods  ever  brought  under  my 
notice  to  see  how  this  can  be  remedied  by  any  system  of 
paper  money  based  upon  labor,  land,  and  other  so-called 
articles  of  value,  as  the  value  must  depend  upon  supply 
and  demand  ;  and  if  paper  money  could  be  had  by  all 
producers,  there  would  be  too  much  of  one  thing  and  too 
little  of  the  other.  Therefore  gold  is  the  best  measure  of 
value,  and  the  basis    of  the  best  medium    of  exchange 


THE   ORIGIN  OF  MONEY.  2/ 

between   all  men.     We  do  not  take  a  note  if  we  think  it 
can  only  be  paid  by  another  note  which  has  a  limited 
sphere  of  value,  but  we  take  it  because  we  think  at  any 
time  the  five  sovereigns  it  represents  are  to  be  had  by 
applying  for  the  same,  and  that  the  five  sovereigns  will 
give  us  equal  value  to  what  we  gave  for  the  note  any- 
where, everywhere.     You  may  talk    as  you    like    about 
money  being  only  a  medium  of  exchange,  you  cannot 
alter  the  fact  that  money  is  the  universal    medium    of 
exchange,    because    it    is   based  on    the  value    of   gold 
or  silver  ;  and  paper  is  taken  as  money  because  it  is  ac- 
cepted as    a  promise    to  pay  gold  for  it  when  wanted. 
Paper,  like  steam,  is  eminently  useful  in   prudent  hands, 
but  of  tremendous  hazard  when  not  controlled  ;  and  the 
majority  lack  the  practical  wisdom  required  to  manage 
paper  money,  the  sagacity  to  know  when  to  expand  and 
contract  it  ;  and    they    forget  that,    working  with    such 
explosive  materials,  whenever  there  is  a  doubt,  they  should 
incline  to  the  side  of  safety.     Hopeful  men  are  not  fit  to 
use    such  a    dangerous  weapon, — they    over-trade  ;  but 
there  could  be  no  over-trading  without  reckless  credit, 
and  this  latter  is  caused  by  the  facilities  offered  by  banks. 
The  remedy  for  panics    is  to   borrow  less,   to  give  less 
credit,  and    to    keep  trade    to  legitimate  demands    and 
healthy  channels.     Keep,  in  fact,  to   real  money,  which 
can    hardly   ever    multiply    too  much    in  any   country, 
because  its  legitimate  increase  is  the  certain  sign  of  the 
increase  of    trade,  or  thrift,  of    which  it  is    the   meas- 
ure, and   consequently,  of   the  soundness  of  the  whole 
body.     But    paper     money    may,    does     increase  with- 
out any  increase  of  trade  or  thrift,  for  it  is  not  the  meas- 
ure of  the  trade  or  providence  of  a  nation,  but  of  its 


28  MONE  Y. 

necessities  ;  and  it  is  absurd,  and  must  be  ruinous,  that 
the  same  cause  which  naturally  exhausts  the  wealth  of  a 
nation  should  likewise  be  the  only  productive  cause 
or  representative,  of  its  money.  For  instance,  there  are 
those  who  argue  that  "consols  "  should  be  the  basis  of 
money.  A,  they  say,  lends  the  government  ^i,ooo,  and 
if  he  had  a  transferable  promissory  note  he  would  retain 
a  representation  of  his  money,  although  he  had  parted 
with  the  reality.  I  know  no  better  way  of  explaining  the 
respective  merits  of  gold  and  paper.  Those  in  favor  of 
the  gold  currency  say  "  No."  A  has  transferred  his  gold 
to  B,  therefore  is  simply  entitled  to  his  name  being  en- 
tered down  as  a  creditor  of  the  state,  entitled  to  so  much 
interest,  and  with  power  to  sell  his  debt  when  he  can  find 
a  purchaser,  and  it  would  be  very  unfair,  and  depreciate 
the  value  of  every  one  else's  gold,  if  he  had  a  piece  of 
paper  like  a  bill  of  exchange  that  he  could  cash  in  case 
of  need  for  the  money  so  lent.  There  would  be  in  reality 
two  moneys  in  existence,  the  "  paper  money  "  and  the 
"  real  money,"  for  which  the  borrower  has  been  able  to 
obtain  value  in  exchange,  the  paper  money  representing 
a  debt  truly,  but  with  no  real  money  behind  it  ;  as  money 
in  the  funds  is  not  money  at  all, — it  is  a  debt,  bringing  in  a 
certain  interest  yearly,  and  on  account  of  the  regularity 
of  payment  of  this  interest,  the  people  with  money  gen- 
erally are  willing  to  pay  the  money  back  to  A  and  have 
the  indebtedness  transferred  from  his  name  to  theirs. 
But,  in  plain  language,  the  possessor  of  a  thousand 
pounds'  worth  of  stock  possesses  nothing  in  reality  but 
the  right  of  receiving  the  interest  of  a  thousand  pounds, 
which  money  of  his  the  government  of  the  time  having 
need  of,  borrowed  of  him,  and  spent.    Bank  notes  as  now 


WHAT  IS  MONEY?  29 

issued  are  the  only  legitimate  paper  money,  and  the 
nation  should  watch  jealously  any  increase  thereof,  un- 
less warranted  by  an  increase  of  gold  in  the  coffers  of 
the  bank  ;  or,  as  you  will  perceive  further  on,  my  opinion 
is  that  the  state  alone  should  issue  notes  ;  and  that  all 
bankers  ought  to  have  the  right  to  obtain  the  notes  they 
require,  by  depositing  with  the  government  national  or 
other  securities  of  the  full  value  of  the  same  ;  every  note 
to  be  stamped  when  issued  in  proportion  to  its  value  ;  and 
that  notes  should  be  issued  for  one  pound,  two  pounds, 
three  pounds,  four  pounds,  as  well  as  for  five  pounds, 
etc.,  as  at  present. 

WHAT  IS  MONEY? 

The  reply  of  most  will  be  :  That  something  which 
raises  us  above  those  small  schemes  and  struggling  in 
which  the  mass  of  the  people  have  to  pass  their  existence  ; 
that  something  which  enables  us  to  feel  secure  of  our 
position,  which  enables  us  to  be  uppermost,  to  feel  our- 
selves on  the  highest  round  of  the  social  ladder,  and 
therefore  worshipped  by  all  of  us,  because  we  hate  the 
idea  of  being  inferior  to  anybody. 

Money  is  a  power  whose  sway 

Angel  forms  adore, 
And  the  lost  obey, 
Weeping  evermore. 

It  will  do  us  all  good  to  understand  money  better,  and 
talk  about  it  more  than  we  are  in  the  habit  of  doing.  It 
is  the  key  to  a  man's  character  how  he  talks  of  money. 
Most  people  treat  money  as  if  it  were  a  sin  to  mention 
it  ;  it  is  a  subject  rarely  talked  about  in  society — or  they 


30  MONE  Y. 

hug  it  to  themselves  as  a  bosom  friend.  It  needs  a  well 
balanced  brain  to  understand  and  treat  money  at  its  real 
value,  and  you  can  detect  the  weakness  or  strength  of  a 
man  by  the  way  he  talks  about  money.  Some  will  speak 
of  it  as  if  happiness  consisted  in  possessing  it  ;  whereas 
happiness  is  not  in  the  money,  but  how  the  man  will  use 
it.  The  secret  of  happiness  is  to  look  things  in  the  face, 
to  resolve  to  do  your  best  and  endure  the  worst,  to  realize 
that  "all  is  not  lost  when  much  is  lost."  The  happy 
man  is  he  who  grasps  the  idea  that  the  struggle  of  making 
life  contented  is  always  to  make  the  best  of  things  that 
might  be  worse  ;  to  such  souls  "  there  are  spring  days 
in  winter." 

What  is  money  ?  "A  simple  invention  it  was,"  says 
Mr.  Carlyle,  "  in  the  old  world  grazier,  sick  of  lugging 
his  slow  ox  about  the  country  till  he  got  it  bartered  for 
corn  or  oil,  to  take  a  piece  of  leather,  and  thereon  scratch 
or  stamp  the  mere  figure  of  an  ox,  pecus,  put  it  in  his 
pocket,  and  call  it  pecunia,  money.  Yet  hereby  did  barter 
come  to  be  sale  ;  the  leather  money  is  now  golden  and 
paper,  and  all  miracles  have  been  out-miracled  ;  for  there 
are  Rothschilds  and  English  national  debts  ;  and  whoso 
has  sixpence  is  sovereign,  to  the  length  of  sixpence,  over 
all  men  ;  can  command  cooks  to  feed  him,  philosophers  to 
teach  him,  kings  to  mount  guard  over  him,  to  the  length 
of  sixpence."  If  money  be  "  the  sinews  of  war,"  it  is 
that  because,  in  a  much  more  real  sense,  it  is  the  sinews 
of  trade.  Money  is  metal  coined  for  the  purposes  of 
commerce,  and  is  usually  stamped  with  the  name  and 
arms  of  the  king  or  ruler  of  the  state  that  directs  it  to 
pass  current.  In  a  more  enlarged  sense,  money  means 
any  representation  of  property,  whether  as  coin  or  in  the 


WHAT  IS  MONEY?  3 1 

form  of  paper  ;  the  circulating  medium  now  means  any 
currency  usually  and  lawfully  employed  in  buying  and 
selling  as  the  equivalent  of  money,  as  bills  of  exchange, 
bank  notes,  cheques.  Money  was  originally  stamped 
coin,  and  afterwards  any  thing  that  generally  takes  its 
place  in  buying  and  selling.  Cash  was  originally  coin 
kept  in  hand  for  immediate  use  ;  and  hence  cash  pay- 
ments are  strictly  payments  in  coin,  though  bank  notes 
and  cheques  are  ordinarily  received  in  such  cases  because 
of  the  public  faith  that  they  can  always  be  cashed  at  the 
bank.  Money  in  political  economy  is  any  representation 
of  wealth,  whether  metallic  or  paper,  issued  by  govern- 
ment and  sustained  by  their  credit.  Commercially,  bills 
of  exchange  are  very  powerful  as  monetary  agents.  Mr. 
Macleod  tells  us  that  "  money  is  a  representation  of 
debt,  a  right  or  title  to  demand  something  from  some 
one  else,"  and  that  "  the  special  and  particular  purpose 
of  money  is  to  represent  the  debts  that  arise  from  the  un- 
equal exchanges  of  men."  Debts  are  deferred  payments  ; 
whether  money  is  given  at  once,  or  the  goods  are  taken 
away  upon  a  covenant  to  pay  for  them  a  month  later,  the 
nature  of  the  exchange  remains  the  same.  No  new  ele- 
ment is  introduced  ;  the  exchange  is  simply  not  com- 
pleted at  the  time.  But  the  debt  is  not  money.  By 
means  of  bills  the  tradesman  can  sell  his  claims  to  his 
banker,  who  will  lend  him  the  money  and  receive  from 
the  purchaser  the  money  when  due.  But  it  is  a  great 
error  to  call  a  debt  money — that  is,  wealth.  Debts  are 
not  wealth,  but  simply  an  acknowledgment  by  A  that  he 
has  received  property  of  the  value  thereof  from  B,  and 
that  he  will  pay  the  money  at  a  specified  time.  In  large 
transactions  debts  are  settled    by  cheques  and  bills  of 


32  MONEY. 

exchange.  A  bill  of  exchange  purports  to  be  an  acknowl- 
edgment by  B  that  he  owes  A  a  certain  sum  of  money 
for  value  received,  the  bill  being  payable  to  A  or  his 
order.  By  endorsing  the  same  he  transfers  his  right  to 
receive  from  B  a  certain  sum,  at  a  time  specified,  to  C, 
on  condition  that  C  gives  him  the  money  at  once,  less 
interest  for  the  time  to  run.  Bills  of  exchange  are  very 
useful  as  remittances  between  different  countries,  and 
for  adjusting  the  commercial  debts  which  may  be  mu- 
tually due  and  owing  by  other  parties,  besides  those 
whose  names  may  appear  on  the  bills  as  drawers  and 
acceptors.  Bills  are  purchased  by  those  who  have  to 
make  remittances  to  places  on  which  they  are  drawn  of 
parties  by  whom  they  are  drawn  ;  and  the  trade  of  pur- 
chasing and  selling  bills  forms  an  important  branch  of 
monetary  business,  conducted  by  persons  who  are  termed 
exchange  brokers.  The  value  of  the  bills  when  offered 
for  sale  depends  not  only  on  the  actual  amount  for  which 
they  are  drawn,  but  also  on  the  conditions  of  the  market 
as  regards  the  demand  and  supply.  If  there  are  plenty 
of  bills  offered  in  any  particular  city,  the  price  falls,  and 
when  they  are  scarce  it  rises.  The  fluctuations  in  prices 
are  made  public  twice  a  week  in  London  by  what  is 
termed  the  "  Course  of  Exchange,"  being  a  list  of  the 
chief  cities  on  which  bills  are  drawn,  and  it  shows  the 
rate  of  exchange,  or  the  premium,  or  discount,  on  bills 
in  the  places  specified.  Bills  of  exchange  are  very  use- 
ful, and  relieve  the  mind  immensely.  A  merchant  with 
heavy  payments  would  never  be  able  to  bear  the  strain 
were  it  not  for  the  knowledge  that  he  holds  in  reserve  an 
amount  of  paper  money  that  in  case  of  need  his  bankers 
will  pass  to  the  credit  of  his  account,  at  the  rate  of  inter- 


WHAT  IS  MONEY?  33 

est  current  at  the  time,  according  to  his  position.  Good 
bills  may  always  be  discounted.  The  facilities  for  con- 
verting bills  into  cash  have  caused  at  all  times  a  large 
amount  of  what  are  called  "  accommodation  bills."  In 
reality  such  bills  are  a  fraud,  and  the  drawer  and  acceptor 
of  all  such  fictitious  documents  ought  to  be  punished  for 
obtaining  money  under  false  pretences.  Their  origin 
arose  as  follows  :  A  trader  unable  to  meet  his  liabilities, 
yet  in  good  credit  with  his  banker,  gets  a  friend,  custom- 
er, or  employe  to  accept  a  bill  or  bills,  and  pays  the 
same  into  his  banker's  with  other  good  bills,  upon  the 
assumption  they  are  all  bona-fide  trade  bills,  received  by 
the  merchant  from  his  customers  for  goods  sold  and  de- 
livered. As  the  bill  or  bills  become  due,  the  same 
operation  is  repeated  to  raise  money  to  meet  it ;  until 
invariably  at  last,  during  some  commercial  panic,  the 
banker,  being  more  cautious,  refuses  certain  bills,  and 
the  bubble  bursts.  The  ruin  of  the  insolvent  trader 
himself  is  accomplished,  and  he  not  unfrequently  draws 
along  with  him  others  who  unfortunately,  or  imprudently, 
or  fraudulently  have  been  acting  in  collusion  to  pass  off 
as  genuine  bills,  for  value  received,  those  unsubstantial 
representatives  of  value.  Legally,  a  bill  of  exchange,  as 
well  in  its  original  formation  as  in  its  successive  trans- 
fers, is  an  assignment  of  a  debt,  by  which  the  right  of 
the  original  creditor  to  sue  for  and  obtain  payment  is 
transferred  to  the  holder  for  the  time  being.  It  is  this 
assignability  vesting  in  the  holder  a  right  of  action 
against  the  original  parties,  which  chiefly  distinguishes  a 
bill  of  exchange  from  every  other  form  of  legal  contract. 
Another  important  privilege  is,  that  though  a  simple 
contract  debt,  and  as  such  requires  consideration  to  give 


34  MONE  Y. 

it  legal  efficacy,  the  consideration  is  presumed  until  the 
want  of  it  be  shown.  It  is  available,  therefore,  in  the 
hands  of  bona-Jide  holders  upon  merely  formal  proof  of 
title  by  the  signature  of  the  party  to  be  charged — that  is 
to  say,  it  is  unnecessary  to  prove  value  given  unless  it  be 
first  shown  on  the  other  side  that  the  bill  is  in  some  stage 
or  other  tainted  with  an  illegality  ;  and  the  bona  fides  are 
assumed  until  it  shall  be  made  to  appear  that  the  holder 
was  at  the  time  of  making  it  privy  to  that  illegality. 

Money  is  defined  by  Colonel  Torrens  as  "  the  only 
power  which  cannot  only  effect  the  purchase  of  a  com- 
modity, but  close  the  transaction."  A  bill  of  exchange  is 
"not  money,"  although  used  as  a  medium  of  exchange, 
but  it  does  not  close  a  transaction  ;  it  is  merely  a  writ- 
ten acknowledgment  of  indebtedness  by  A  B  to  C  D, 
enabling  the  latter  to  raise  money  if  needed  thereby. 

The  precious  metals,  gold  and  silver,  have  always 
been  esteemed  the  most  desirable  kind  of  property  to 
hold,  and  through  all  time  have  been  held  in  great 
importance. 

In  the  second  chapter  of  Genesis  we  are  told  of  "  the 
land  of  Havilah,  where  there  is  gold,  and  the  gold  of 
that  land  is  good "  ;  and  in  the  Book  of  Kings,  that 
"  silver  was  nothing  accounted  of  in  the  days  of  Solomon, 
who  made  silver  to  be  in  Jerusalem  as  stones."  As 
standards  of  value,  a  basis  for  all  exchange,  a  solvent 
of  all  human  transactions  of  a  commercial  character,  the 
precious  metals  have  always  been  of  great  service. 

In  "Money  and  Morals,"  Mr.  Lalor  says  that  "money 
is  gold,  notes,  and  bank-credit ;  "  but  this  is  not  a  correct 
definition  of  money,  which  in  reality  is  gold  and  silver, 
and  the  notes  and  bank  credits  are  only  useful,  and  only 


WHAT  IS  MONEY?  35 

money,  in  the  sense  that  by  their  aid  the  necessary  gold 
and  silver  can  be  obtained.  Notes  or  checks  are,  as  a 
medium  of  exchange,  of  course  equally  useful  as  money 
itself,  as  being  a  substitute  for,  or  representative  of,  so 
much  money  ;  they  have  the  power  to  obtain  the  par- 
ticular kind  of  wealth  one  has  need  of.  Money  is 
wealth,  but  must  not  be  confounded  with  the  jrai  wealth 
it  commands  ;  it  is  only  one  of  the  powers  necessary  to 
obtain  real  wealth,  "  all  useful,  or  necessary,  created 
things."  But  the  power  of  money  is  unmistakable  in 
times  of  panic,  or  when  one  of  those  hurricanes  to 
which  we  are  periodically  exposed  sweeps  over  the  face 
of  society,  uprooting  establishments  of  the  oldest  growth, 
and  hurrying  the  fairest  creations  of  human  industry  in 
ruin  before  it.     Truly,  with  Shelley,  then  we  feel 

"  The  awful  shadow  of  some  unseen  power 
Floats,  though  unseen,  amongst  us." 

Who  are  then  the  strong  men  to  stand  unbowed  beneath 
the  storm  ?  Not  the  man  for  whom  thousands  are  work- 
ing, still  less  the  manufacturer  with  his  costly  machines, 
or  the  merchant  with  his  warehouse  full  of  goods,  and 
his  organized  corps  of  laborers,  whom  it  seems  equal  ruin 
to  retain  or  to  discharge.  Whilst  the  possessors  of  real 
wealth  are  paralyzed  and  trembling,  the  men  whose 
dominion  for  the  time  is  supreme  are  those  possessing  a 
good  stock  of  short-dated  bills  of  exchange,  easy  of  dis- 
count anywhere,  or  whose  balance  at  their  bankers  is 
such  that  they  can  deliver  the  proudest  merchant  from 
the  jaws  of  ruin  by  a  leaf  from  their  check  book.  These 
are  the  men  who,  according  to  the  great  thought  of 
De  Quincey,  "  have  but  to  touch  a  spring  in  London  to 


36  MONE  Y. 

produce  a  vibration  throughout  the  world,  to  quicken  or 
arrest  the  march  of  armies,  to  frustrate  the  ambition  of 
kings  and  statesmen,  and  to  perform  the  noble  exploits 
of  modern  civilization — those  great  ocean  canals  and 
railways  which  bind  together  the  families  of  men." 

When  we  think  upon  its  great  power,  we  must  be 
ready  to  make  allowance  for  those  who  foolishly  regard 
money  as  an  end  in  itself,  and  not  as  a  means  ;  and 
hence  their  life  is  spent  in  honor  of  the  deity  "Mam- 
mon." Their  song  and  praise  are  ever  ready  to  do 
homage  to  the  great  idol  they  worship  so  indefatigably 
from  early  morning  to  dewy  eve.  Aye,  not  on  the  Sab- 
bath-day only,  but  every  day,  "  their  God  is  Mammon  "  ; 
their  entire  being  is  absorbed  in  thinking  how  to  obtain 

"  Gold  !  gold  !    Nothing  but  gold  ! 

Bright  and  yellow,  and  hard  and  cold  ! " 

Money  is  different  to  barter,  inasmuch  as  in  an  act  of 
barter  each  of  the  two  parties  make  both  a  sale  and  a 
purchase.  Each  in  parting  with  what  he  brings  acquires 
a  power  of  purchase  which,  however,  is  at  the  same 
instant  extinguished  by  his  receiving  an  equivalent.  The 
introduction  of  money  as  a  currency  of  "  medial  com- 
modity "  divides  the  act  of  barter  into  two  parts. 
Henceforth  the  seller  exchanges  his  goods  for  a  purchase 
power,  which  he  can  reserve  and  exercise  at  his  own 
time  and  with  a  different  party.  The  essence  of  a 
medium  of  exchange  consists  in  its  giving  this  power.  A 
metallic  currency  was  an  immense  step  in  civilization  ; 
gold  was  obtained  in  exchange  for  domestic  products. 
Each  portion  was  a  substitute  for  a  portion  of  useful 
articles   sent   away.     The  currency  of  the  country  was 


WHAT  IS  MONEY?  37 

obtained  by  the  community,  as  a  whole,  having  paid  for 
it  a  full  equivalent  out  of  the  produce  of  its  labor,  and 
has  acquired  an  instrument  of  singular  power  in  quick- 
ening industry  and  developing  not  only  material  but 
moral  resources.  By  a  law  of  the  human  mind  we  come 
in  time  to  prize  any  habitual  instrument  of  gratification 
beyond  the  gratification  itself.  Wise  rulers  and  teachers 
would  impress  on  the  people  under  them  the  necessity 
and  value  of  thrift,  as  by  easily  and  multiplied  associa- 
tions, money,  gold,  becomes  attractive,  and  is  very  stimu- 
lating to  common  minds,  more  so  than  the  things  which 
it  commands,  and  thus  is  instrumental  in  infusing  a  new 
energy  into  industry.  The  essential  characteristic  of 
money  appears  to  be  that  of  acting  as  an  universal 
equivalent,  in  giving  a  power  of  purchasing  anywhere  to 
its  possessor,  whatever  he  desires,  as  far  as  its  value 
goes,  and  the  exercise  of  which  power  effects  a  payment 
as  well  as  a  purchase.  Capital  may  be  defined  as  money 
saved  ;  that  is,  lent  to  labor  to  purchase  the  necessary 
materials  and  necessaries  of  life  whilst  making  or  creating 
new  wealth.  Paper  money  is  useful  as  a  medium  of  ex- 
change for  home  purposes,  and  less  costly  than  gold, 
paper  supplying  the  same  good  offices  to  gold  that  credit 
does  for  capital  ;  as,  being  in  good  credit,  your  banker 
helps  you  by  loan,  or  discounting  bills,  with  the  capital 
necessary  for  carrying  on  trading  operations. 

The  distinction  between  gold  and  paper  money  is  this  : 
The  man  who  sells  his  goods  for  gold  is  paid  :  "  the 
gold  is  payment."  It  is  real  barter  in  one  sense,  as  one 
commodity  is  given  in  exchange  for  another.  The  gold, 
if  desired,  can  be  melted,  and  sold  in  ingots  for  purposes 
of  art,    for   those   who   use  gold  ;n  different  kinds  of 


$8  MONEY. 

manufactures  ;  and  this  shows  that  (less  cost  of  coinage) 
it  is  full  payment.  People  take  it  because  it  is  a  com- 
modity worth  the  goods  given  for  it  ;  hence  it  is  that 
gold  is  so  valuable  as  a  medium  of  exchange.  Men  soon 
found  out  that  it  was  impossible  for  them  to  exchange  the 
relative  products  of  their  labor  conveniently  without 
some  medium  representing  value.  It  is  extraordinary 
from  the  earliest  period  of  the  world,  and  indeed  down  to 
the  present  day,  how  very  curious  are  some  of  the  sub- 
stitutes for  what  we  now  call  money,  which  have  been  in 
use,  at  one  time  or  the  other,  in  different  parts  of  the 
world.  It  may  be  taken  as  an  axiom  that  the  con- 
venience of  the  medium  of  currency  indicates  the  civili- 
zation of  the  community.  There  are  many  parts  of 
Asia  where  the  cowrie  shell  is  still  the  habitual  cur- 
rency. Of  course  these  little  shells  are  of  infinitesi- 
mally  small  value  in  themselves  ;  but,  such  as  they  are, 
they  are  sufficient  to  procure  for  their  owners  a  meal  of 
those  cheap  productions  in  which  those  countries  abound. 
In  some  parts  of  Africa  a  measure  of  salt  is  the  measure 
of  value,  and  in  those  countries  salt  consequently  be- 
comes the  currency  ;  and  even  so  late  as  the  last  century, 
when  Adam  Smith  wrote,  it  was  not  unusual  with 
our  neighbors  on  the  other  side  of  the  Tweed  to  pay  the 
baker's  bill  or  the  ale-house  score  in  iron  nails. 

Those  who  argue  in  favor  of  paper  money  assume  that 
trade  is  bad  for  want  of  gold,  that  low  prices  are  unre- 
munerative,  and  that  unremunerative  prices  kill  trade. 
They  are  right  and  wrong.  There  is  no  denying  that  the 
general  power  of  consumption  is  sufficiently  strong  to  put 
aside  the  idea  of  over-production  so  far  as  regards  the 
satisfying  the  wants  of  the  masses  ;  and  that  supposing 


WHAT  IS  MONEY?  39 

that  every  one  had  more  gold,  there  would  be  more  pur- 
chases made  ;  therefore  it  is  a  want  of  gold  that  indi- 
rectly causes  diminution  of  demand.  But  by  this  want 
of  gold,  please  remember  I  mean  solely  the  want  of 
power  of  the  would-be  purchaser  to  offer  in  barter  for  the 
gold  produce  of  equal  value.  In  fact,  briefly,  it  is  under- 
production, not  over-production,  that  causes  depression 
of  trade. 

Over-production  is  nothing  but  under-consumption.  It 
is  not  that  more  things  are  produced  than  could  be  used, 
but  either  that  more  of  certain  articles  are  produced  than 
there  is  a  demand  for,  or  that  the  people's  power  of 
purchase,  the  want  of  money  to  buy  the  articles  pro- 
duced, forces  them  to  consume  less  than  usual,  or  than 
they  have  been  doing.  Therefore  it  is  under-production 
that  causes  the  distress.  The  remedy  is  to  "  produce 
more  "  ;  create  more  produce,  and  get  in  e.xchange  for  it 
"money."  Over-production  is  an  absurdity  ;  that  is  to 
say,  an  over-production  of  articles  really  needed.  If 
every  household  had  the  purchasing  power,  could  all  the 
factories  supply  for  a  time  a  sufficiency  of  bedding, 
clothing,   furniture,    etc.,    that    could    be    bought  ? 

There  is  abundance  of  gold,  abundant  facilities  to  get 
money  in  1SS7  ;  but  the  power  to  obtain  the  gold  is 
wanting.  We  do  not  want  to  be  flooded  with  paper 
money,  giving  people  the  power  to  obtain  the  goods  that 
are  in  existence  ;  we  want  the  people  to  see  that  they 
must  work  harder,  and  produce  more  or  consume  less. 
Trade  is  bad  because  the  people  have  not  the  gold  to  buy 
commodities  they  could  use.  But  they  must  be  taught  it 
is  the  want  of  gold  as  a  thing  of  intrinsic  value,  the  want 
of  gold  as  a  commodity,  the  want  of  the  right  to  barter 


40  MONE  Y. 

by  being  in  a  position  to  give  gold,  or  notes  based  on 
gold,  or  any  commodity  of  equal  value  that  gives  you  for 
your  goods  a  something  that  will  get  you  an  equivalent 
anywhere.  And  the  want  of  money,  so  much  com- 
plained of,  is  caused  by  the  want  of  goods  to  give  in  ex- 
change for  it.  The  only  remedy  is  to  "produce,"  and  to 
get  the  power  to  purchase  something  that  you  want  and 
another  man  has.  It  is  useless  to  say  these  are  mere 
prejudices  in  favor  of  gold  and  silver.  I  deny  the  right 
to  affix  the  stigma  of  prejudice  against  the  innate  mor- 
ality of  the  nation  that  decrees  its  money  shall  be  real 
and  ?iot  pretence.  Paper  may,  by  the  signature  of  a  good 
name,  or  by  the  stamp  of  the  state,  or  in  the  shape  of  a 
note  from  a  local  bank  of  repute,  or  the  bank  of  the 
nation,  acquire  a  local  value,  and  seem  as  precious  to  the 
unthinking  mind  as  the  gold  it  or  they  represent ;  but  it 
must  not  be  forgotten  that  this  value  is  only  local,  and 
that  the  assumed  value  the  paper  passes  for  is  upon  the 
supposition  that  the  real  money  is  available  at  a  certain 
date  on  the  one  hand,  or  on  demand  upon  the  other. 
Paper  money  may  be  as  useful  and  be  more  economical 
for  all  purposes  of  internal  commerce  ;  and  I  admit  that 
it  is  ;  but  it  is  not  money.  The  very  best  paper  money 
extant  is  but  a  promise  to  pay  money  ;  therefore  it  is  not 
available  for  foreign  commerce.  And  the  depression  of 
trade  arises  not  for  want  of,  but  because  of,  the  fictitious 
money  that  has  been  used  to  develop  trade  beyond  its 
legitimate  compass  ;  and  the  low  prices  are  the  result  of 
producing  a  certain  class  of  goods  in  excess  of  the 
demand  for  it,  or  the  money  available  at  the  time  for  that 
particular  commodity.  It  must  not  be  forgotten  that  in 
the  greatest  crisis  or  panic  that  ever  existed,  there  is, 


WHA  T  IS  MONE  Y?  4 1 

always  has  been,  as  imich  gold  as  was  really  needed.  The 
panic  arises  from  so  many  people  asking  for  gold  they 
really  do  not  tuant,  and  locking  up  temporarily  by  their  in- 
sane action  the  money  that  is  needed  to  meet  demands 
and  engagements  made  before  the  panic  was  contem- 
plated ;  hence  there  is  apparently  a  scarcity,  but  always 
money  enough  for  those  who  have  a  right  to  it.  The 
exceptionally  high  rate  of  interest  for  a  brief  period 
would  affect  no  solvent  firm,  the  panic  does  good  service 
in  making  bankers  and  money-lenders  cautious,  and 
stops  rotten  houses,  or  houses  trading  on  fictitious 
paper,  accommodation  bills,  etc.  ;  and  the  losses 
on  forced  sales  are  incurred  by  those  who  have 
been  speculating  beyond  their  position,  by  those  who 
rely  on  smooth  sailing,  and  who,  in  order  to  keep  their 
vessels  afloat,  have  to  get  rid  of  superfluous  stock  for 
what  it  will  fetch,  but  whose  losses  may  be  traced, 
and  should  be  attributed,  to  their  want  of  judgment,  and 
commercial  and  financial  incapacity.  The  advocates  of 
"paper"  are  right  ;  all  these  panics  arise  from  want  of 
money  ;  but  it  is  from  want  of  money  that  never  ought 
to  have  been  wanted.  It  is  not  wanted  by  the  trade  or 
business  or  financial  establishments  judiciously  worked, 
but  by  those  reckless  schemers,  financial  and  commercial, 
who  have  been  distributing  so  freely  "paper"  broad- 
cast, and  with  no  real  value  behind.  Yet  we  are  asked 
to  increase  this  fictitious  instrument,  as  a  means  of  pre- 
venting catastrophes  brought  about  by  it  ;  like  the  Irish- 
man, who,  being  told  to  take  two  pills,  argued  to  himself 
that  as  by  taking  two  pills  he  would  be  so  much  better, 
therefore  if  he  took  four  he  would  be  so  much  better 
still.     There  is  no  doubt  that  during  the  last  fifty  years 


42  MONE  Y. 

the  producing  capacity  of  the  world  has  increased  im- 
mensely ;  but  it  is  wrong  to  infer  that  because  we  quad- 
ruple the  powers  of  production  we  necessarily  require  a 
inetalUc  currency  four  times  greater.  This  is  a  mistake. 
I  tell  Mr.  Harvey  that  "paper  money  is  the  money  of 
civilization  "  ;  that  our  exchanges  are  effected  without 
the  use  of  gold  ;  that  gold  and  silver  are  only  wanted 
for  change  ;  that  97  per  cent,  of  the  settlements  are 
made  by  checks  ;  that  by  a  system  of  book-keeping,  ex- 
change of  goods  for  goods,  value  for  value,  is  made  by 
check  from  A  to  B,  and  the  sum  simply  credited  to  B 
and  debited  to  A  ;  no  money  passes.  We  want  no  ficti- 
tious paper  money,  but  greater  care  that  it  be  more 
jealously  excluded  for  the  future  by  our  bankers.  It  is 
not  the  "  convertibility  "  of  our  paper  money  that  is  at 
the  bottom  of  panics  ;  it  is  an  ignorance  of  money  that 
is  the  cause.  A  better  system  of  currency  would  lessen 
the  effects  of  panics  ;  but  panics  and  depressions  are 
caused  by  departures  from  the  genuine  system,  by  an 
unnatural  inflation,  caused  by  the  temporary  substitu- 
tion of  paper,  in  the  shape  of  bills,  by  a  class  of  reck- 
less, speculative  traders,  shippers,  "  foreign  merchants  " 
as  they  call  themselves,  who  have  been  too  freely  helped 
by  bankers,  men  of  straw,  who,  if  the  venture  does  not 
pay,  are  not  prepared  to  redeem  the  promises  when  due. 

CURRENCY. 
Currency — a  region  of  mystery,  that  may  be  justly 
described  as  chaos.  The  word  has  been  a  bugbear  at  all 
times  ;  introduce  it,  you  are  voted  a  bore  ;  men  fly  from 
the  subject,  as  though  to  obtain  clear,  definite,  and  intel- 
ligible knowledge  thereof  was  a  task  exceeding  the 
powers  of  the  human  intellect. 


CURRENCY.  43 

"  There  was  no  need,"  exclaimed  recently  an  ex-Lord 
Mayor  in   the  House  of  Commons,  "  to  go  into  all  the 
deeper  cjuagmires  of  bank  notes  and  such  things,  which 
no  man  could  understand  in  this  world,  or,  as  he  believed, 
in  the  next."     Having  a  different  opinion  I  have  written 
this  book,  believing  that  not  only  is  man  easily  able  to 
understand  what  money,  bank  notes,  bills,  etc.,  are,  but 
that  he  ought  to  know  all  about   such  important  subjects. 
Currency  is  only  an  invention  of  man's,  a  contrivance 
devised  for,  and   capable    of  being  altered   to   suit  the 
wants,    and     render    an    indispensable    service    to    the 
practical  life,  of  every  civilized  people.     It  is  an  insult 
to    the   Creator    to   imagine    that    man's  reason    cannot 
comprehend   the    action    of    an    instrument,  a    machine 
invented  by  man  himself,  to  perform  a  specific  purpose  ; 
that  he  cannot  understand  the  operations  of  a  tool  con- 
structed   at    the    dawn   of    civilization,    and    which    has 
gradually  been  varied  and  its  powers  added  to,  accord- 
ing to  the  need  of  man's  progress.     Whether  they  will 
trouble  themselves  to   study  and  master  the  subject  or 
not  remains  to  be  seen  ;  but  this  is  certain,  that  it  is  of 
vital  importance  to  the  prosperity  and  happiness  of  every 
nation  to  solve  correctly  this  currency  question,  as  a  bad 
or  inadequate  currency  inflicts  the  most  severe  calamities 
on  a  nation  ;  periods  of  loss  and  ruin,  public  and  private, 
are   inevitable,  from   an  ill  adapted,  badly  constructed 
currency.     It  seems  incredible  that  men  should  be  satis- 
fied with  using  so  important  a  tool  as  money,  a  tool  that 
is  in  every  man's  hand,  and  yet  never  give  a  thought  to 
the  question — What  money  is,  what  it  does  ;  is  it  a  good 
tool,  can  we  have  a  better  ;  or  does  our  present  currency 
do  for  us  all  money  can  do  or  we  require  it  to  do  for  us  ? 


44  MONE  Y. 

I  have  no  doubt  in  my  own  mind  that  money  might  be 
made  infinitely  more  useful  to  every  living  being  if  they 
properly  understood  what  it  is  ;  and  also  as  positively 
assert  that  it  is  a  subject  that  can  be  easily  and  natur- 
ally explained,  and  be  understandable  by  every  one,  if 
men  only  choose   that  it  shall  be. 

Currency  is  that  which  is  in  circulation,  or  is  given 
and  taken  as  having  value,  or  as  representing  property  ; 
as  the  currency  of  a  country,  a  specie  currency ;  coin, 
strictly  speaking,  generally  called  "  money."  The  word 
is  derived  from  Juno  Moneta,  whose  temple  was  the  mint 
in  which  Roman  coin  was  made,  the  stamped  pieces  of 
metal  which  constituted  the  currency  of  Rome.  Thus 
the  word  money  implies  minting  ;  that  is,  the  shaping 
and  stamping  those  bits  of  metal  which  are  employed 
in  buying  and  selling.  Barter  was  the  fundamental 
basis  of  commercial  transactions  ;  bullion  was  an  acces- 
sory, very  costly,  most  convenient,  indispensable  in  fact, 
among  wealthy  and  civilized  nations,  where  the  consum- 
ers had  so  many  wants  ;  but,  owing  to  the  division  of 
labor,  each  worker  produced  so  little  that  was  of  use  to 
himself,  that  simple  barter  soon  became  too  cumbrous  a 
process,  and  utterly  impracticable  for  wholesale  transac- 
tions, shopping,  or  retail  business  ;  so  counters  or  "cur- 
rency "  coins,  notes,  bills,  checks,  were  introduced  as 
needed  by  society  to  facilitate  the  exchange  of  com- 
modities in  buying  and  selling,  superseding  barter,  and 
gold  became  the  basis  of  value,  and  was  enthroned  as 
a  special,  and  has  become  to  be  regarded  almost  as  a 
sacred,  metal  by  nearly  half  the  civilized  world.  As  a 
basis  of  value  there  is  no  better  medium  than  gold  ;  its 
utility  consists  in  its  representing  value  in  little  bulk, 


CURRENCY.  45 

and  it  readily  admits  of  the  gains  of  life  being  reckoned 
and  possessed  in  less  cumbrous  form  than  houses  and 
land,  herds  of  cattle,  or  ships  and  merchandise.  So 
gold  has  become  established  as  the  metallic  currency, 
as  the  form  we  recognize  to  represent  all  other  forms 
of  wealth  ;  and  although  as  a  metal  for  any  purposes  of 
utility  almost  worthless  of  itself,  it  derives  its  great 
value  from  the  other  kinds  of  property  of  which  it  has  be- 
come the  acknowledged  representative.  As  a  metal,  its 
intrinsic  value  rests  upon  the  difficulty  in  getting  it ;  the 
cost  of  conveying  men  to  the  distant  gold  countries,  the 
cost  of  their  living  in  a  region  where  every  thing  is  very 
dear  owing  to  the  distance  from  which  it  must  be 
brought,  and  to  the  extra  profit  men  require  before  they 
will  go  so  far  and  suffer  so  much.  Society  pays  dearly 
for  its  counters,  a  heavy  price  ;  each  ounce  of  gold  repre- 
sents so  much  labor  withdrawn  from  agriculture  and 
other  industrial  pursuits,  which  minister  directly  to  the 
necessities  and  comforts  of  mankind. 

We  find  by  experience  we  cannot  do  without  money  ; 
that  it  is  essential  to  have  it,  as  buying  and  selling  can- 
not be  done  without  it  ;  that  men  generally  take  it  in 
exchange  for  their  labor,  or  their  goods,  or  their  houses  ; 
that  in  exchange  for  it  we  can  supply  ourselves  with  all 
the  comforts  of  life,  the  luxuries  of  modern  times.  Yet 
to  prove  it  is  only  of  value  when  recognized  as  such,  we 
find  that  in  China,  India,  Japan,  Asia  generally,  the 
people  repudiate  the  peculiar  value  we  attach  to  the 
yellow  metal,  gold,  and  they  exalt  the  shining  white 
metal,  silver,  into  a  similar  conventional  importance  ; 
whereas  here,  although  we  all  take  silver  as  we  do  gold, 
and   accept    it   as    being, — whether    sixpence,    shilling. 


46  MONE  Y. 

florin, — of  proportionable  value  to  gold,  yet  legally  silver 
is  not  money  here  ;  that  is,  it  is  not  a  legal  tender,  and 
may  be  refused,  save  to  the  extent  of  forty  shillings,  in 
payment  of  a  debt  or  in  exchange  for  gold.  Above  forty 
shillings  the  law  regards  silver  simply  as  bullion  ;  it  is 
no  more  money  than  it  is  a  legal  tender,  a  medium  of 
exchange  for  debt  or  goods,  than  is  brass  or  tin. 

We  laugh  if  a  semi-civilized  people  propose  to  pay  us 
for  our  goods  in  sea-shells,  or  some  other  form  of  non- 
metallic  currency  ;  we  fail  to  see  that  the  value  of 
money,  or  the  counter  used  as  such,  is  the  exchangeable 
power  people  give  to  it.  These  barbarians  are  equally 
averse  to  receive  our  gold  and  silver  coins,  which  we 
have  been  taught  to  regard  as  the  perfection  of  money  ; 
but  the  value  is  only  in  their  power  as  and  when  they  are 
recognized  as  a  medium  of  exchange.  These  barbarous 
tribes  prefer  selling  us  their  produce  for  beads  and 
trinkets  that  we  consider  as  of  no  value.  You  will 
therefore  perceive  that  although  we  regard  gold  as  all  in 
all,  fully  one  half  of  the  civilized  world  do  not,  silver 
taking  the  highest  place  with  them,  whilst  barbarous 
tribes  refuse  to  accept  as  money  either  our  gold  or  silver 
coins. 

A  few  years  ago,  when  the  trade  with  Japan  was 
opened,  our  merchants  were  surprised  to  find  that  the 
Japanese  appraised  gold  very  differently  from  us  ;  so 
that  a  sovereign  was  only  considered  by  them  as  equal 
to  about  one  fourth  of  the  quantity  of  silver  which  it 
represents  with  us.  Half-a-dozen  kinds  of  silver  coin 
are  current  at  Shanghai  in  Cliina,  five  kinds  of  the  dol- 
lar and  the  Indian  rupee  ;  but  until  1855  the  old  Span- 
ish Carolus  dollar  was  the  only  legal  tender  ;  the  Carolus 


CURRENCY.  47 

dollar  was  the  one  best  known  to  the  Chinese  merchants, 
and  the  one  in  which  they  had  most  confidence  ; 
and  to  show  what  ])rejudice  does,  although  the  intrinsic 
value  of  the  five  dollars  was  the  same,  the  old  Carolus 
dollar  was  considered  to  be  worth  7^.,  whereas  the  others 
were  barely  worth  5^-.  This  is  an  extreme  case,  but  all 
people  view  with  suspicion  the  money  of  other  people. 
The  English  sovereign  is  taken  on  the  Continent,  but 
does  not  circulate  there,  no  more  than  napoleons  will 
circulate  in  England  ;  being  strange  to  the  people,  they 
are  suspicious  of  them,  and  (as  foreign  coins  are  never 
a  legal  tender  in  any  country)  refuse  to  receive  them  as 
money. 

Another  fact  not  generally  known  here  is,  that  silver, 
which  we  do  not  recognize  as  a  legal  tender  beyond  the 
sum  of  forty  shillings,  is  the  most  widely  recognized,  and 
therefore  holds  the  first  place  in  the  currency  of  the 
world.  ■  It  is  the  standard  money  of  China  and  of  India, 
and  is  recognized  as  money  all  over  Europe  and  Amer- 
ica. It  used  to  be  the  standard  money  of  Europe,  the 
English  pound  and  the  French  livre  originally  consisting 
of  a  certain  amount  of  silver  ;  and  at  this  day  it  still 
constitutes  the  greater  portion  of  the  currency  of  the 
Continent,  and  in  many  of  the  outlying  and  half-barbar- 
ous parts  of  the  world  silver  will  be  accepted  where  gold 
coins  would  be  refused.  Gold,  however,  is  steadily 
rising  in  monetary  importance,  owing  to  its  greater  por- 
tability, and  there  is  every  probability  that  gold  will 
ultimately  be  supreme  in  the  metallic  currency  of  the 
civilized  world.  We  have  implicit  confidence  in  it, 
and  all  of  us  feel  when  we  get  a  sovereign,  whether  for 
our   labor,   or   the    sale    of   our    goods,  or  in    payment 


48  MONE  V. 

of  a  debt,  that  it  is  worth  the  20^.  we  give   in  exchange 
for  it. 

It  would  be  very  unwise  to  undermine  this  confidence 
in  the  power  of  gold  coin,  that  it  can  only  be  had  by 
giving  for  it  full  value  in  other  goods.  But  this  import- 
ant consideration  is  too  much  overlooked,  that  to  sell 
property,  and  receive  for  it  money,  gold  coins,  or  notes 
with  a  right  to  receive  gold  coin,  is  no  increase  of  riches, 
but  merely  an  exchange  of  two  articles  of  wealth  of 
equal  value,  a  precious  metal  for  some  other  article. 
You  have  the  coin,  I  have  the  property  ;  if  we  can  agree 
to  sell  the  one  for  the  other,  well  and  good  ;  but  do  not 
forget  we  are  but  making  an  exchange,  and  there  is  no 
increase  in  the  nation's  or  world's  riches  by  exchanging, 
but  only  in  producing.  An  increase  in  the  crop  of  tea 
increases  the  wealth  of  China,  and  increases  ours,  as  we 
can  buy  more  tea  for  the  same  money  ;  but  cheaper  gold 
coin  does  not  increase  the  national  wealth,  it  only  in- 
creases the  nominal  value  of  goods  ;  that  is,  more  gold 
has  to  be  used  in  the  exchange  of  goods  ;  but  there  is  no 
increase  in  real  wealth,  in  the  quantity  of  goods  pro- 
duced. We  think  we  are  richer,  but  we  are  not,  as  the 
larger  quantity  of  gold  only  exchanges  for  the  lesser 
quantity  of  goods,  only  does,  in  fact,  the  work  of  the 
smaller  quantity  of  gold  used  in  effecting  the  exchange 
heretofore.  The  common  opinion  is  the  other  way,  that 
as  the  object  of  all  trade  is  to  obtain  money,  the  object 
of  our  foreign  trade  should  be  to  export  less  than  we  im- 
port, and  unless  we  receive  gold  to  make  the  difference, 
there  is  no  benefit  therefrom  ;  as  if  gold  was  more  to  be 
rejoiced  over  than  raw  material  to  manufacture  the 
articles  we  require,  but  do  not  possess.     People  see  that 


CURRENCY.  49 

all  strive  after  gold,  are  all  eager  to  part  with  what  they 
have  for  gold,  not  for  ornament,  not  to  keep  ;  it  is  got  to 
be  parted  with,  and  is  striven  after,  because  it  performs 
a  service  to  its  owner  more  readily  than  any  other  instru- 
ment he  can  obtain  ;  it  is  the  most  useful  tool  that  was 
ever  made,  and  performs  thoroughly  for  man  the  work 
for  which  it  was  made.  It  should  not  be  left  idle.  If 
we  do  not  want  to  use  it,  it  will  bring  us  interest  by  lend- 
ing it  to  those  who  do  ;  it  is  too  costly  a  tool,  too  inval- 
uable a  machine,  too  productive  an  instrument  to  lie 
idle  in  our  pockets  ;  it  does  its  work  not  by  staying  in  its 
owner's  hands,  but  by  leaving  them.  No  other  concep- 
tion of  coin  is  rational  or  intelligible.  It  may  be  wise 
with  money,  as  with  other  tools,  to  provide  a  stock 
of  it  beforehand,  lest  it  may  not  be  procurable  when 
it  is  wanted  for  use  ;  but  the  fact  remains,  that  money 
is  of  no  utility  whatever  except  when  employed  as 
a  tool  ;  that  is,  except  when  it  exercises  its  proper 
function  by  being  got  rid  of  in  exchange  for  other 
property. 

Gold  and  silver  were  used  as  media  of  exchange  at  a 
period  long  anterior  to  that  when  they  appeared  in  the 
form  of  coin  ;  our  earliest  record  of  primitive  civiliza- 
tion, the  Bible,  informs  us  that  gold  and  silver  were  used 
in  lieu  of  direct  barter  as  early  as  the  time  of  Shem,  and 
we  learn  that  Abraham  returned  from  Egypt  "  very  rich 
in  cattle,  silver,  and  gold."  But  although  a  metallic 
medium  of  exchange,  passing  by  weight,  was  adopted  at 
a  very  early  period,  the  use  of  actual  coins,  passing  by 
tale — that  is  to  say,  by  counting,  the  weight  and  purity  of 
each  piece  guaranteed  by  the  government  of  a  state  by 
means  of  a  public  seal  or  stamp  of  a  sacred  character, 


50  MONE  Y. 

was  a  later  invention.  How  came  coin  to  be  introduced  ? 
From  necessity.  The  need  of  a  medium  of  exchange  is 
one  of  the  most  urgent  wants  which  beset  humanity. 
The  immense  advantages  of  money  were  soon  universally 
felt  ;  and  its  value  was  so  self-evident,  that  its  origin 
came  to  be  invested  with  a  mystic  character,  and  was  by 
succeeding  ages  shrouded  in  fable  ;  Saturn,  Mercury, 
and  other  divinities,  having  successively  received  the 
credit  of  this  important  invention.  To  appreciate  its 
value  you  have  only  to  imagine  for  one  moment  society 
without  its  aid  ;  buyers  wanting  to  obtain  certain  goods, 
and  the  difficulty  of  obtaining  sellers  who  would  be 
willing  to  accept  those  which  they  have  to  offer  in  ex- 
change. The  tailor  might  starve  before  he  found  a  baker 
who  was  in  want  of  a  coat.  The  separation  of  employ- 
ment, the  division  of  labor,  is  essential  to  social  existence. 
No  man  can  supply  all  his  own  wants  ;  we  all  depend 
upon  others  for  most  of  the  articles  we  use  and  require. 
At  the  present  time  it  needs  one's  undivided  attention  to 
excel  in  the  making  of  special  things  ;  and  the  providing 
and  distributing  of  the  multitudinous  things  which  human 
life  requires  employs  an  immense  army  of  trained  buyers 
and  sellers.  This  giving  to  others  what  you  have  in 
order  to  obtain  from  them  what  you  require,  was  an 
impossibility — a  difficulty  which  must  have  been  fatal  to 
civilization.  Money,  a  7nedium  of  exchange,  was  thought 
of  ;  it  was  rude  and  simple  at  first,  but  the  key  was  given, 
the  social  problem  was  solved  ;  and  subsequently  the 
idea  has  been  enlarged,  and  it  is  our  duty  to  trace  its 
origin,  to  know  what  money  has  been,  what  it  is,  if  it  is 
what  it  should  be,  and  whether  we  can  help  to  improve 
the  vast  benefits  it  confers  upon  mankind. 


CURRENCY.  51 

Barter  or  exchange  between  buyer  and  seller  is  of 
course  the  more  simple  operation,  but  it  is  not  practi- 
cable ;  simple  enough  if  you  could  always  find  some  one 
willing  to  take  what  you  have,  and  able  to  offer  what  you 
require  in  exchange  thereof  ;  but  this  not  being  possible, 
the  difficulty  is  at  once  conquered  by  money.  Barter 
your  property  for  money,  then  take  the  money  and  get 
for  it  what  you  like  and  when  you  like.  This  is  the  ac- 
tion, as  it  is  the  essence,  of  "  currency  "  ;  it  enables  you 
to  sell  for  "  money,"  of  such  intrinsic  value  that  it  will 
obtain  for  you  anywhere  what  you  want,  and  when  you 
want  it.  Your  property  might  lie  idle,  will  cost  you 
money  to  warehouse  it,  will  deteriorate  in  value  ;  whereas 
the  gold  in  exchange  thereof,  properly  used  or  invested, 
will  continue  to  grow  and  multiply.  To  its  utility  money 
owes  its  success.  No  law  can  compel,  nor  does  our  law 
command,  traders  to  sell  or  give  their  goods  in  exchange 
for  money  ;  tlie  law  imposes  on  us  the  obligation  of  tak- 
ing as  a  legal  tender  money  for  our  debts,  and  sets  the 
example  by  taking  it  for  taxes  ;  but,  as  Aristotle  said, 
men  "  agreed  "  to  take  money  in  exchanging,  and  it  is  a 
matter  of  voluntary  agreement  to  this  day.  With  us 
there  seems  no  difficulty  in  the  matter ;  but  until  the 
seller  knew  that  all  other  sellers  would  consent  to  do  ex- 
actly the  same  thing — viz.,  give  him  their  goods  as  readily 
for  his  money  as  he  had  given  his  goods  for  it — there 
must  have  been  considerable  difficulty,  as  no  seller  would 
be  disposed  to  part  with  his  property  in  exchange  for 
coin  unless  he  felt  sure  the  money  furnished  him  with 
the  power  to  procure  by  its  means  property  to  the  value 
of  that  which  he  had  given  for  it.  Money,  to  be  valuable 
as  a  medium    of  exchange,  must  give  this   guaranty  :  a 


52  MONEY. 

seller  must  feel  secure  that  he  will  get  by  a  second  pur- 
chase all  that  he  gave  away  in  the  first.  There  must  be 
value  for  value  ;  and  with  a  metallic  currency,  with  a 
note  issue  convertible  into  gold,  with  bills  of  exchange, 
checks,  all  credits  based  upon  the  gold  coin,  traders 
part  with  their  property  without  hesitation  ;  all  feeling 
a  complete  assurance  that  they  get  in  exchange,  in 
money,  a  commodity  worth  that  which  they  are  selling 
for  it.  So  every  one  takes  gold  ;  it  is  felt  to  be  an  equal 
exchange  of  property  for  property.  The  value  of  the 
gold  in  the  market  enables  it  as  the  medium  of  exchange 
to  command  goods  of  equal  value  everywhere. 

Money  is  a  commodity  ;  its  value  does  not  consist  in 
its  being  stamped  as  coin  by  the  mint.  The  mint  coins 
an  ounce  of  gold  into  ^T)  ^7^-  lo^^-  Here  is  the  defi- 
nition of  a  pound,  and  a  pound  is  the  meaning  and  worth 
of  a  sovereign.  If  a  copper  coin  could  be  obtained 
from  the  miners  only  at  the  same  cost  as  a  gold  one, 
they  both  would  be  equally  valuable  ;  but  it  cannot,  and 
so  the  goldsmith  will  give  a  vast  deal  more  for  the  gold 
coin  than  the  coppersmith  will  for  the  copper  one  ; 
and  that  is  the  very  reason  why  every  seller  will  give 
many  more  goods  for  the  one  than  he  will  for  the  other. 
It  is  the  intrinsic  value  of  the  metal,  its  cost  as  a  com- 
modity, which  renders  it  so  useful  and  valuable  in  doing 
its  work  as  a  coin,  as  the  medium  of  exchange.  The 
mint  only  makes  known,  on  the  word  of  the  govern- 
ment, that  the  coined  sovereign  is  made  of  standard  gold, 
and  possesses  when  it  leaves  the  mint  in  full  the  pre- 
scribed weight  ;  in  the  words  of  Aristotle,  "  imjjressing  a 
stamp  on  money  to  relieve  men  of  the  trouble  of  measur- 
ing it." 


GOLD  MONEY.  53 

Paper  money  plays  the  most  important  part  in  our 
currency  ;  without  it,  the  present  commerce  of  the  world 
would  be  impossible.  Only  a  bit  of  paper,  yet,  having 
faith  in  it  as  a  representative  of  value,  it  is  taken  as  will- 
ingly as  gold.  Currency  of  every  kind,  everywhere,  is 
essentially  dependent  upon  man's  faith  in  man,  upon  which 
all  credit  is  based.  Having  faith  we  accept  the  shadow 
for  the  substance,  and  take  the  "  representative  of 
wealth,"  the  "five-pound  note,"  as  if  it  were  five  golden 
sovereigns.  Therefore,  the  currency,  like  "  Caesar's  wife," 
must  be  above  suspicion.  Money  is  a  reservoir  of  great 
power  ;  it  is  condensed  wealth,  available  at  any  moment, 
for  any  purpose.  "If  there  were  no  currency,  no  con- 
ventional means  for  storing  up  the  accumulated  gains  in 
an  instantaneously  negotiable  form,  how  long  would  be 
the  time,  and  how  cumbrous  the  preparations,  requisite 
to  perform  an  expedition,  to  get  u])  a  railway  company, 
or  to  accomplish  any  great  object !  " 

GOLD  MONEY. 

Be  men  !  rise  above  the  savage  worship  of  mere  coin  ; 
do  not  continue  to  worship  the  image,  but  the  living 
power  it  possesses  when  rightly  used,  wisely  used  as  a 
medium  of  exchange.  Do  not  hoard  it,  but  give  life  to 
your  gold,  rub  the  canker  off  it,  by  sending  it  from 
hand^  to  hand.  "  He  best  worships  the  God  who 
made  the  heaven  and  the  earth,  and  the  sea,  and  the 
mines  of  iron  and  gold,  by  helping  Him  in  His  work 
with  His  own,  and  striving  to  learn  to  do  His  will 
with  the  use  of  them."  Every  thing  has  a  mission  ; 
aye,  especially 


54  MONE  Y. 

"Gold!  Gold!  Gold!  Gold! 
Good  or  bad  a  thousand-fold  ! 
How  widely  its  agencies  vary, 
To  save,  to  ruin,  to  curse,  to  bless  !  " 

— Hood. 

Alas  !  too  true,  the  general  practice  is  to  give  the 
credit  to  the  money,  and  not  to  the  man,  nor  as  to  how 
he  has  made  it.  Gold  and  gold,  and  nothing  but  gold,  is 
thought  of.  So  the  vices  and  virtues  are  written  in  a 
language  the  world  cannot  construe,  but  it  reads  them  in 
a  vile  translation,  and  the  translators  are  failure  and  suc- 
cess. Oh,  for  the  day  when  the  world  will  only  make  of 
heroes  to  worship  and  imitate,  the  truly  great — those 
who  are  so,  not  with  what  fortune  can  give  the  base,  but 
with  deed  and  ends  of  which,  for  the  great,  fortune  is  but 
the  instrument.  And  so  in  time  our  youth  may  be  trained 
to  perceive  that  the  true  ambition  of  a  man  is  his  desire 
for  the  wisdom  to  be  able  to  wield  properly  the  power 
wealth,  when  earned  or  inherited,  puts  into  his  hands. 

Do  not  be  impatient,  my  friend  ;  my  moralizings 
are  at  an  end,  and  we  will  begin  at  once  about  gold, 
that  yellow  substance  all  civilized  men  so  eagerly 
seek  after — for  which,  in  their  mad  desire  to  obtain, 
men  flocked  to  the  gold-fields  in  feverish  haste,  although 
disease,  like  the  fabled  dragons  and  griffins  of  old, 
kept  horrid  sentry  over  the  buried  treasures.  A  pecul- 
iar fever,  of  the  typhoid  character,  was  that  natural 
denizen  of  the  spot ;  besides  which,  tlie  gold  seekers 
suffered  severely  from  eye-blight,  owing  to  the  concen- 
trated blaze  of  the  sunshine  reflected  from  the  steep 
sides  of  the  ravine,  and  they  were  at  all  times  grievously 
tormented    by  clouds  of   flies.     Bad  diet  and  want  of 


GOLD  MONEY.  55 

vegetables  aggravated  the  diseases  natural  to  the  places 
and  to  the  kind  of  work.  It  was  a  valley  of  death. 
"  Constitutions  that  had  borne  the  hardships  of  other 
fields  broke  down  here,"  wrote  an  eye-witness  of  the 
scene  ;  "and  hundreds  have  perished,  dying  unattended 
and  unknown."  The  little  levels  between  the  stream  and 
the  base  of  the  mountain  wall  for  ten  miles  along  the  valley 
are  so  thickly  studded  with  graves  that  the  river  appears 
to  run  through  a  churchyard."  One  new-comer,  wiser 
than  the  rest,  having  counted  eleven  corpses  carried  past 
his  tent  during  the  dinner  hour  of  his  first  working  day, 
and  thinking  that  even  gold  may  be  purchased  too  dearly, 
left  the  place  instantly.  Many  abandoned  it  after  a  some- 
what longer  trial.  But  the  greater  number,  fascinated  by 
the  unusual  richness  of  the  gold-bed,  remained  in  de- 
fiance of  disease,  and  "  took  their  chance,"  Avith  what 
result  the  numerous  graves  of  the  valley  testify  to  this 
day.  It  was  a  scene  "to  point  a  moral  or  adorn  a  tale." 
Had  some  wandering  spirit  from  another  planet  looked 
down  upon  the  valley  of  death,  or  upon  the  many  other 
striking  incidents  of  the  gold-fever  of  the  last  fifteen 
years  ;  if  he  had  seen  men  in  myriads  rushing  across 
oceans  and  continents  to  the  gold-fields  of  California  and 
Australia,  waste  places  in  the  uttermost  parts  of  the 
earth  ;  if  he  had  beheld  them  toiling  in  the  gulches  of 
the  mountains,  amidst  all  manner  of  hardship  and  dis- 
ease, beset  with  extremes  of  weather,  exhausting  work, 
exorbitant  prices,  and  lawless  society — he  must  have 
said  to  himself  :  "  Surely  mankind  have  some  mighty  end 
in  view,  when  so  many  myriads  come  here  to  toil  and 
suffer  with  such  feverish  energy  and  extraordinary  en- 
durance."   Yet  the  yellow  substance  which  these  crowds 


56  MONE  V. 

so  eagerly  seek  after,  what  could  it  do  for  them  ?  They 
could  not  eat  it  or  drink  it  ;  it  was  neither  food,  medi- 
cine, nor  clothing  ;  it  was  simply  a  metal  of  unusual 
weight  and  ductility,  and  exhibiting  a  yellow  lustre. 
And  were  this  wandering  spirit  to  show  a  piece  of  the 
yellow  metal  to  one  of  the  natives  of  the  country,  and  ask 
its  use,  the  savage  would  tell  him  that  it  served  to  make 
rings  for  wearing  in  the  nose  and  ears,  or  on  other  parts 
of  the  body,  by  way  of  ornament,  but  otherwise  of  no 
account  ;  it  could  neither  head  an  axe  for  him,  nor  point 
a  spear.  In  fine,  were  this  planetary  sage,  following  the 
track  of  the  gold  ships,  to  proceed  to  Europe,  and  the 
abodes  of  civilization,  to  see  what  is  made  of  the  metal 
which  men  seek  for  with  so  much  eagerness,  he  would 
find  that  the  getting  of  it  is  so  expensive  that  (unlike  iron 
and  lead)  it  is  of  no  use  in  the  necessary  commodities  of 
life,  and  only  figures  as  a  costly  means  of  ornamental 
decoration.  He  would  find  it,  in  fact,  so  far  as  the  arts 
of  life  are  concerned,  closely  allied  in  character  to  gems 
and  precious  stones,  the  exorbitant  prices  given  for  which 
show  how  much  barbarism  still  lurks  under  the  cloak  of 
civilization. 

But  this  inquiring  spirit  would  also  see  another  side  to 
the  question.  Were  he  to  go  into  our  banks,  our  market- 
places, our  counting-houses,  he  would  speedily  compre- 
hend the  object  for  which  we  mortals  seek  gold  and  prize 
it  so  much.  If  he  were  to  visit  the  great  emporium  in 
Threadneedle  Street,  with  its  busy  throng  of  customers 
ceaselessly  depositing  or  withdrawing  the  yellow  metal, 
and  thereafter  were  to  watch  for  half  an  hour  the  gay 
crowds  who  go  a-shopping  in  Regent  Street,  he  would  see 
that  this  metal  is  the  recognized  symbol  of  property  with 


GOLD  MONEY.  57 

which  we  can  convert  our  wealth,  whether  it  be  of  land, 
houses,  or  merchandise,  storing  it  up  in  little  space,  and 
which  we  can  reconvert  into  any  kind  of  property  at 
pleasure.  He  would  see  that  by  common  consent  nearly 
one  half  of  the  entire  civilized  population  of  the  earth 
take  this  view  of  the  matter,  and  have  made  the  yellow 
metal  indispensable  to  them,  by  decreeing  it  to  be  the 
substance  out  of  which  shall  be  made  the  counters  with 
which  men  buy  and  sell,  and  reckon  up  the  gains  of  ma- 
terial existence.  (From  "  Economy  of  Capital,"  R.  H. 
Patterson.) 

Gold  is  not  simply  an  expression  of  value.  It  does  not 
mean  that  the  gold  sovereign  merely  represents  20s.,  but 
that  it  represents  a  certain  definite  quantity  of  gold.  The 
value  of  gold  is  ^3  175.  \o\d.  an  ounce,  and  the  sov- 
ereign is  of  the  intrinsic  value  of  ;Q\  because  it  contains 
about  a  quarter  of  an  ounce  of  gold.  Gold  differs  from 
silver  coinage,  the  latter  being  only  three  fourths  of  the 
weight  it  represents  in  money  value — that  is,  the  silver 
coin  circulates  for  one  fourth  more  than  its  real  value. 
So  again  copper  coins  pass  current  for  more  than  three 
times  what  they  are  worth  intrinsically.  Silver  and  cop- 
per coins,  therefore,  are  "  tokens  "  of  value,  but  are  not 
actually  worth  the  sum  they  respectively  represent ;  and 
for  that  reason  it  is  not  legal  to  tender  more  than  40.?.  in 
silver  or  i^.  in  copper  coin  in  payment  of  a  debt.  Gold, 
on  the  other  hand,  has  an  intrinsic  value  independent  of 
its  nominal  value,  and  the  advantage  of  this  is  that  al- 
though all  men  make  use  of  tokens  at  home,  we  could 
not  make  use  of  tokens  in  our  dealings  with  foreign 
nations  ;  so,  having  large  payments  to  make  to  foreign- 
ers, the  only  medium  we  can  use  for  that  purpose  is  gold. 


58  MONEY. 

In  1847,  what  with  our  bad  crop  of  grain  and  the  failure 
of  the  potato  crop  in  Ireland,  the  government,  to  avert 
a  famine,  entered  into  large  engagements  for  the  importa- 
tion of  grain  of  all  kinds,  and  from  all  parts  of  the  world. 
Wherever  there  was  grain  to  be  got,  it  was  bought  up  by 
the  government,  as  well  as  by  the  merchants  who  im- 
ported it  in  the  ordinary  course  of  their  trade.  To  carry 
out  these  large  operations  needed  in  gold  ;^2o,ooo,ooo 
more  than  the  ordinary  amount,  and  this  gold  had  to  be 
taken  from  the  coffers  of  the  Bank  of  England,  and  was 
sent  to  America,  Russia,  and  Prussia  in  payment  for  the 
extraordinary  purchases  of  corn.  Such  was  the  intensity 
of  the  emergency,  it  roused  our  commercial  activity,  and 
although  the  Baltic  was  closed,  gold  was  sent  by  trusty 
messengers  to  Russia,  Poland,  and  elsewhere  to  buy  up 
wheat  and  barley,  in  order  to  save  the  people  of  England 
and  Ireland  from  starvation.  It  is  obvious  that  if  we 
had  not  had  that  reserve  of  gold  in  the  Bank  of  England, 
if  we  had  not  had  in  hand  something  that  would  be 
acceptable  to  all  the  rest  of  the  world,  we  should  have 
been  wholly  without  resources  to  meet  such  an  emer- 
gency ;  and  we  thus  see  the  advantage  of  gold  in  com- 
mercial operations  with  other  countries  ;  in  fact,  it  ought 
to  be  used  solely  as  the  medium  of  exchange  with  foreign 
countries.  As  it  is  acceptable  all  over  the  world,  it  is  a 
universal  medium  of  exchange  ;  thus  gold  is  very  useful, 
nay,  essential  for  foreign  trade,  and  should  always  be 
here  ready  to  meet  the  balance  against  us  in  dealing  with 
foreign  countries.  V/hen  we  import  more  than  we  ex- 
port, we  send  out  gold  to  pay  the  difference  ;  when  the 
demand  for  our  manufactures  is  active,  or  we  have  a 
good  harvest  and  do  not  need  to  buy  so  much  corn  from 


GOLD  MONEY.  59 

abroad,  then  the  foreign  countries  have  to  pay  us  the 
balance  in  gold  ;  and  London  being  the  chief  monetary- 
centre,  gold  comes  in  from  all  parts  of  the  world. 

Everybody  will  take  gold  at  its  intrinsic  value,  and 
wherever  you  may  be,  or  whatever  you  may  need  to  buy, 
the  purchase  can  be  made  anywhere  with  gold.  Its 
power  is  so  great,  we  can  scarcely  wonder  that  the  de- 
sire, the  thirst  for  it,  becomes  as  absorbing  as  the  thirst 
for  alcohol  by  the  drunkard,  or  that  it  has  led  to  such 
crimes  in  all  ages  to  obtain  it.  Gold's  hunger  gives  to 
the  face  a  strange  fascination  ;  in  the  eagerness  for  it, 
pain  and  weariness  are  forgotten.  The  craving  desire 
for  gold  has  a  wonderftil  influence  upon  the  face  and 
action  of  the  body.  Watch  the  keen  look  of  a  trader,  or 
any  man  debased  to  the  sordid  level,  and  see  how  near 
his  face  is  to  the  cunning  look  of  the  monkey,  and  how 
the  desire  for  gain  has  degraded  the  image  of  his  man- 
hood. Better  poverty  than  wealth  if  it  can  only  be  ob- 
tained by  such  a  selling  of  the  soul,  such  a  forfeiture  of 
our  dignity  as  men,  such  a  levelling  of  our  higher  natures 
to  that  of  savages  and  animals,  such  a  sacrifice  of  all  the 
higher  pleasures  of  our  natures  to  the  one  insatiable  de- 
sire erf  gain. 

Wealth  is  more  often  a  curse  than  a  blessing.  I  have 
known  men  happy  and  contented  whilst  poor,  seen  them 
bravely  struggle  through  adversity  and  difficulty,  and 
seen  them  miserable  with  wealth,  begrudging  parting 
with  the  money  they  have  got  to  love  too  well,  seen  their 
brains  turn  and  their  minds  lose  their  balance  with  the 
thought  of  its  leaving  them,  and  committing  suicide  to 
escape  from  imaginary  evils,  the  effect  of  their  dis- 
ordered minds,  through  yielding  to  the  one   absorbing 


6o  MONE  Y 

idea  of  increasing  yearly  their  stock  of  gold,  to  leave  be- 
hind them  to  their  children,  and    too  often    ruin  their 
nature.     Wealth   is   a  hindrance   rather  than  a  help  to 
young  men  in  this  life's  work  ;  it  takes  away  the  motive, 
the  stimulus,  to  exertion,  the  desire  to  succeed,  which  in 
the  majority  of  cases  means  the  desire  to  make  money. 
To  remedy  this,  the  education  of  our  youth  of  both 
sexes     must     embrace    the    fullest    knowledge    of    the 
laws    of    life    and    the  duties   of   home.       They    want 
broader  views  and    issues    brought  before    their  men- 
tal horizons.     At  the  earliest  period  the  child  must  be 
taught    to  regard  the  body  as  the  shrine    of    the  soul, 
to  be  kept  as  a  sacred  trust  for  their  Creator,  unsullied 
and  inviolate.     This  would  naturally  follow  if  he  were 
taught  the  minutest  details  of  that  wondrous  machine, 
the  human  body,  with  its  delicate  tissues,  its  processes, 
its  powers.     Let  the  young  be   taught  this  first  idea  of 
their  Maker  from   that  wonderful  creation,  the  human 
body  and  soul — a  creation  so  beautifully  adapted  by  its 
Creator  to  give  pleasures  if  well  treated,  and  so  much 
pain  if  neglected  and  dishonored.     Having  taught  him 
the  meaning  of  the  life  that  is  in  him,  follow  it  up  with 
giving  an  object  in  life  in  the  future  that  is  before  him  ; 
tell  him  of  the   faculties  and  powers  that  are  entrusted 
to  him  ;  give  his  life  a  significance,  an  aim  ;  and  by  this 
means,   and  this  only,  will  money  cease  to  be  an  "end," 
and  become,  what  it  should  be  to  all  of  us,  a  "  means  " 
only  to  the  higher  ends  in  view. 

SILVER  MONEY. 

The  price  of   silver  had  been  undergoing  a  slow  de- 
cline for  some  years,  but  in   1876  this  suddenly  culmi- 


SILVER  MONEY.  6l 

nated  in  a  fall  of  prices  within  a  few  months  from  56-^^. 
to  48^^/.  an  ounce  ;  the  whole  fall  in  four  years  repre- 
senting a  depreciation  of  more  than  20  per  cent,  in  the 
value  of  the  metal,  measured  in  gold.  The  effect  of  this 
fall  in  silver  will  be  best  understood  if  you  imagine 
gold,  the  basis  of  our  currency,  to  be  suddenly  reduced 
in  value  one  fifth.  The  fall  in  silver  has  this  effect  upon 
India,  as  silver  is  to  that  country  what  gold  is  to  ours — 
the  basis  of  its  currency.  Here  we  sell  and  reckon 
by  the  gold  sovereign,  there  they  sell  and  reckon  by  the 
silver  rupee.  So  that  in  1876,  when  silver  fell  to  about 
48^/.  an  ounce,  the  value  of  the  rupee,  expressed  in  gold, 
instead  of  being  2s.  was  reduced  to  less  than  \s.  id. 
Think  of  your  sovereign  being  reduced  in  value  to  15.^. 
\Qd.  In  July,  1887,  the  price  was  44^.  per  ounce,  so 
that  the  rupee  and  our  florin  are  only  really  worth  xdd. 

One  of  the  principal  causes  of  the  depreciation  in  the 
value  of  silver  is  the  large  additional  supply  of  silver 
yielded  by  the  Nevada  mines  in  recent  years.  In  1875 
the  aggregate  production  of  silver  throughout  the  world 
is  estimated  to  have  been  about  ^15,000,000  ;  more  than 
half  this  amount,  ^^8,000,000,  being  obtained  from 
American  mines.  Twenty  years  previously,  namely, 
between  1852  and  1862,  the  average  annual  production 
was  only  from  ^8,000,000  to  ^9,000,000,  and  at  that 
time  no  appreciable  quantity  came  from  the  United 
States.  Simultaneously  with  this  large  increase  in  the 
supply  of  silver  many  circumstances  occurred  which 
greatly  diminished  the  demand  for  silver.  Silver  was 
demonetized  in  Germany  ;  and  Germany  consequently 
not  only  ceased  to  require  the  large  amount  of  silver 
which  she  had  previously  used  for  coinage,  but  a  great 


62  MONE  V. 

portion  of  the  silver  in  circulation  was  withdrawn  and 
sold  by  the  German  government.  Another  circumstance 
which  has  produced  a  very  important  effect  in  diminish- 
ing the  demand  for  silver  is  the  great  increase  in  recent 
years  in  the  Indian  home  charges.  The  value  of  the 
products  exported  from  India  has  always  been  in  excess 
of  the  value  of  those  imported.  Until  quite  lately  the 
balance  was  liquidated  by  transmitting  silver  to  India. 
In  some  years  the  silver  thus  sent  amounted  to  more 
than  ;2^ 1 0,000,000.  Such  a  transmission  of  silver  con- 
stituted one  of  the  chief  sources  of  the  demand  for  sil- 
ver, and  was  indeed  one  of  the  most  important  factors 
in  maintaining  its  value.  Each  addition,  however,  that 
is  made  to  the  home  charges  diminishes  pro  tanto  this 
demand  for  silver.  An  English  merchant,  for  instance, 
who  has  purchased  a  hundred  thousand  pounds'  worth 
of  Indian  produce,  instead  of  sending  silver  to  India  to 
pay  for  it,  purchases  bills  from  the  Indian  government 
in  England  drawn  upon  the  Indian  government  in  Cal- 
cutta, and  the  amount  of  bills  which  the  government 
has  to  sell  in  England  increases,  of  course,  with  each 
increase  in  the  home  charges  ;  and  a  powerful  effect  is 
being  exerted  at  the  present  time  in  depreciating  the 
value  of  silver  by  the  large  amount  of  bills  which  have 
to  be  sold  by  the  Indian  government  in  England  to  pro- 
vide for  the  home  charges.  The  amount  of  the  home 
charges  has  increased  to  a  most  serious  extent  in  recent 
years.  Nothing,  moreover,  can  avert  a  still  further  in- 
crease, if  the  expenditure  is  permitted  so  habitually  to 
exceed  the  revenue  that  money  has  to  be  borrowed  to 
make  good  the  deficit.  The  loans  being  chiefly  raised 
in  England,  it  is  obvious  that  the  interest  on  these  loans 


SILVER  MONEY. 


63 


represents  so  much  more  which  has  to  be  transmitted 
from  India  to  England,  or,  in  other  words,  so  much 
added  to  the  home  charges.  The  largest  portion  of  the 
money  which  has  been  borrowed  in  recent  years  by  the 
Indian  government  has  been  obtained  by  loans  raised  in 
England  ;  and  the  additional  amount  which  has  to  be 
provided  to  meet  the  interest  on  these  loans  represents, 
of  course,  so  much  added  to  the  home  charges.  In 
1S56  the  sum  annually  required  to  pay  the  interest  on 
the  Indian  debt  was  ^2,190,000,  in  1870-71  it  was  p^3,- 
200,000,  and  in  1876-77  it  was  ^4,350,000.  From  these 
figures  it  appears  that  in  twenty  years  the  indebtedness 
of  India  increased  by  about  100  per  cent. 

The  depreciation  in  the  value  of  silver  is  a  very  serious 
matter.  In  1874-5  the  loss  by  exchange  to  the  Indian 
government  was  only  ^500,000,  in  1876-7  the  loss  was 
^^1,676,482,  in  1878-9  the  loss  was  nearly  ^3,500,000. 
In  18S6  the  method  of  charging  exchange  in  the  Indian 
accounts  was  modified,  and  it  may,  therefore,  be  well  to 
give  the  figures  for  the  past  years  on  the  new  system. 
The  following  are  those  which  should  be  adopted  for 
comparison  with  the  charge  in  recent  years  : 


NET   CHARGE   FOR 

NET     CHARGE     FOR 

YEAR. 

YEAR. 

EXCHANGE. 

EXCHANGE. 

Tens  of  Rupees. 

Tens  of  Rupees. 

1875-6 

•    •      1-377,428 

1882-3 

.    .      3,050,923 

1876-7 

2,252,611 

1883-4 

•    •      3,375.158 

1877-8 

2,123,030 

1884-5 

.    .      3,363,986 

1878-9 

2,891,902 

1885-6 

•    •      4,329.888 

1879-80 

2,878,169 

*iS86-7 

.    .      5,252,600 

iSSo-Si 

2,264,848 

fi887-8 

.    .      5,434,800 

1S81-2 

2,421,499 

*  Revised  Estimate. 


+  Budget  Estimate. 


64  MONE  Y. 

The  government  are  also  heavy  losers  by  the  land,  as 
the  revenue  therefrom  is  a  fixed  sum  to  be  paid  in  silver, 
and  the  depreciation  means  receiving  about  one  fourth 
less  rent  until  present  engagements  expire.  The  next 
class  to  suffer  are  all  those  with  fixed  incomes,  the  rupee 
purchasing  so  much  less  in  1887  than  it  did  fifteen  or 
twenty  years  ago. 

The  position  of  the  Indian  government  is  this  :  it  has 
contracted  various   engagements  to  make   payments   in 
England  in  gold,  for  the  interest  of  its  public  debt,  and 
on  the  capital  of  its  guaranteed  railways,  for  the  pensions 
of  its  retired  civil  and  military  servants,  for  its  share  of 
the   home   charges   of  the   European   troops   serving  in 
India,   for  the  supply  of  military  equipments,  the  pur- 
chase of  stores,  the  cost  of  the  establishment  of  the  India 
office,  and  so  forth,  to  the  amount  of  about  seventeen 
millions  sterling  a  year  ;  and  since  the  revenues  of  India 
are  collected  in  silver,  these  engagements  involve  that  its 
government  must  purchase  gold  to  this  amount  out  of 
the  income  which  it  receives  in  silver.     The  nature  of 
the    operation   is   to  a  certain   extent  disguised  by  the 
mode  in  which  it  is  affected,  through  the  agency  of  pri- 
vate trade.     The  commodities  exported  from  India  are 
largely  in  excess  of  imports  into  that  country  :  a  state  of 
things,  it  may  here  be  observed,  which  is  partly  the  con- 
sequence   of   these    home    charges  ;  and    the   exporting 
merchants,  instead  of  shipping  silver  bullion  to  India  to 
pay  fur  the  excess,  purchase  the  bills  which  the  Indian 
council  sell  for  gold  in  the  London  market,  and  which 
are  payable   in   silver  at  the   treasuries  in   India.     The 
amount  of  these  bills  sold  in  the  year  1879  was  seventeen 
millions  sterling  ;  and  the  effect  of  the  arrangement,  so 


SILVER  MONEY.  65 

far  as  the  revenues  of  India  are  concerned,  is  precisely 
the  same  as  if  the  government  of  that  country  were  actu- 
ally to  remit  the  silver  to  England  and  exchange  it  for 
its  equivalent  amount  of  gold.  It  follows  that  the  charge 
on  the  revenues  of  India  in  respect  of  these  payments 
will  fluctuate  with  the  price  of  silver  as  expressed  in 
gold.  So  long  as  silver  was  worth  about  (i\d.  per  ounce 
— its  average  price  for  many  years — the  rupee  was  worth 
almost  exactly  one  tenth  of  a  pound,  and  to  jnirchase 
seventeen  millions  sterling  required  the  remittance  of 
170,000,000  rupees  ;  but  when  silver  fell  to  about  48^. 
per  ounce,  instead  of  170,000,000  rupees  being  sufficient, 
216,000,000  would  be  required;  the  difference,  46, 000,- 
000  rupees,  representing  an  extra  charge  on  the  Indian 
revenues  of  more  than  three  and  a  half  millions  sterling, 
because  the  government  of  India  receives  its  revenues  in 
silver,  and  has  to  make  very  large  payments  annually  in 
gold.  According  to  the  form  adopted  in  the  accounts, 
the  rupee  is  taken  at  2s.,  but,  if  its  value  in  India  is  \s. 
7</.,  a  very  much  larger  number  of  rupees  is  wanted  to 
meet  the  payments  in  England.  This  is  called  the  "  loss 
of  exchange,"  caused  generally  by  transmitting  money 
from  one  country  to  another  ;  but  in  this  case,  princi- 
pally through  the  government  receiving  its  revenues  in 
one  mcia/  and  making  its  payments  in  another^  as  in  taking 
the  rupee  at  \s.  id.  instead  of  2S.  here,  we  only  do  so  be- 
cause of  the  depreciated  value  of  silver  in  relation  to 
gold.  As  a  proof  that  it  is  simply  a  loss  for  want  of  ar- 
rangement, we  have  the  fact  of  a  "  gain  of  exchange  "  in 
the  past,  because  the  government  of  India  in  its  transac- 
tions witli  the  guaranteed  railway  companies  have  fixed 
the  remittance  at  \s.  \od.  per  rupee  under  the  contracts. 


66  MONE  Y. 

The  price  is  continually  fluctuating,  the  rupee  now  being 
only  worth  about  i6d.  This  causes  great  loss  to  mer- 
chants, not  only  from  the  absolute  fall,  but  in  the  uncer- 
tainty which  these  fluctuations  in  price  throw  over  all 
the  operations  of  trade  ;  and  although  it  has  been  going 
on  for  over  ten  years,  nothing  has  been  done  to  remedy 
it.  There  is  no  reason  why  the  currency  should  be 
altered,  but  a  mixed  currency,  or  the  government  at  least 
offering  to  take  gold  as  well  as  silver  for  rent  and  taxes, 
would  counteract,  so  far  as  the  government  actually  is 
concerned,  these  constant  fluctuations  in  the  value  of 
silver,  and  thereby  lessen  the  cost  to  the  government, 
and  save  the  Indian  trade  from  its  speculative  character, 
which  is  so  thoroughly  demoralizing  in  its  tendency. 

There  is  one  cause  for  the  evil,  a  removable  cause  ; 
why  not  remove  it  ?  It  is  the  English  government's  in- 
terference with  the  natural  operations  of  trade,  by  coming 
into  the  market,  and  selling  its  bills  on  India  for  enor- 
mous amounts  by  auction  to  the  highest  bidder.  Instead 
of  the  secretary  of  state  selling  such  large  amounts  of 
council  bills  at  fixed  times,  whether  wanted  or  not,  let  the 
same  be  always  obtainable  at  a  certain  price,  at  some 
government  office.  Let  the  secretary  of  state  act  like 
any  other  exchange  banker,  and  sell  from  day  to  day, 
meeting  demand  as  it  arises.  There  could  not  be  a  more 
stupid  plan  than  the  present — forcing  the  sale  of  a  valua- 
ble article  at  times  when  not  wanted,  or  the  market  is 
overstocked,  to  the  highest  bidder,  simply  because  he 
has  decided  to  sell  so  much  in  one  year,  at  so  much  per 
week.  Trade  will  take  these  drafts  at  a  fair  price  if  gov- 
ernment will  wait  till  they  are  wanted,  instead  of  the 
present  reckless  manner  by  which  these  bills  are   dealt 


SILVER  MONEY.  6^ 

with,  the  victim  of  speculators,  and  the  buffet  of  the 
exchange  banks.  The  obligation  cannot  be  wiped  out  ; 
the  seventeen  millions  of  tribute  from  India  to  England 
must  be  paid.  But  the  mode  of  payment  may  be  altered  ; 
and  the  easiest  plan  is  to  arrange  that  the  revenues  of 
India,  instead  of,  as  now,  being  collected  in  silver,  whilst 
the  Indian  government  is  subject  to  a  heavy  loss,  and 
trade  is  interfered  with,  because  it  receives  in  one  metal 
and  has  contracted  to  pay  in  another,  is  either  to  contract 
to  pay  in  the  metal  it  receives,  or  to  receive  its  revenues 
in  the  metal  it  has  to  pay  its  liabilities  with. 

Currency  is  an  invention  of  man's,  and  it  is  the  duty 
of  every  state  to  try  for  the  soundest  and  most  useful 
system  that  man's  intelligence  can  supply.  We  are  not 
beginning  de  novo ;  we  have  had  centuries  of  experi- 
ence to  guide  us.  Silver  was  the  first  standard  of  value 
in  England  ;  then  we  had  gold  and  silver  ;  and  in  1816 
we  decided  in  favor  of  gold.  Now  we  are  asked  to  use 
again  both  silver  and  gold — bi-metallism  instead  of 
mono-metallism.  The  reason  assigned  is,  that  there  is  a 
deficiency  of  money,  thereby  causing  an  undue  apprecia- 
tion of  gold,  or  a  great  depreciation  in  the  value  of  all  other 
commodities. 

Supply  and  demand  is  the  law  that  regulates  prices. 
By  monetizing  silver,  the  demand  for  it  is  greatly  in- 
creased, and  the  price  would  be  enhanced,  but  it  would 
be  a  loss  to  the  community,  for  the  benefit  of  the  present 
owners  of  silver.  For  example,  silver,  regulated  by  sup- 
ply and  demand,  is  now  worth  3^-.  S^^.  per  ounce  ;  but 
used  as  coin,  it  passes  as  if  worth  55.  2d.  per  ounce,  with 
4</.  per  ounce  added  for  seignorage.  Silver,  however,  is 
only  a  legal  tender  up  to  4o.r.  ;  is  it  wise  to  increase  the 


68  MONE  y. 

circulation  of  silver  coins,  so  that  the  owners  of  silver 
get  for  3^-.  Sd.  goods  to  the  value  of  55-.  ?  But,  it  is 
argued,  you  fix  the  price  of  gold  ;  why  not  legally  fix  the 
price  of  silver  ?  The  reply  is  obvious.  We  must  have 
a  medium  of  exchange.  It  is  a  costly  instrument  ;  but 
why  have  '^iwo"  expensive  tools,  when  "  one"  is  suffi- 
cient for  the  operation  ?  Is  gold  equal  to  our  necessi- 
ties ?  Yes,  undoubtedly.  According  to  Mulhall,  the 
stock  of  gold,  coined  and  uncoined,  in  the  world  in 
1850  was  630  millions  sterling,  and  in  1885,  1,504  mil- 
lions ;  an  increase  of  874  millions  in  thirty-five  years. 
The  imports  and  exports  increased  from  771  millions  in 
1850  to  2,953  niillions  in  1884,  so  that  the  world  was  able 
to  do  2,182  millions  more  trade  with  only  874  millions 
more  gold — a  proof  that  trade  expands  from  other  reasons 
than  an  increase  of  the  currency.  But,  it  is  said,  this 
deficiency  means  dearer  gold  or  cheaper  goods.  If  the 
price  of  goods  depends  upon  the  supply  of  gold,  why  did 
wool  advance  50  to  60  per  cent,  in  the  summer  of  1886  ? 
As  a  matter  of  fact,  there  was  no  difference  in  the  supply 
or  value  of  gold,  but  an  increased  demand  for  wool,  and 
the  price  rose  according  to  the  law  of  supply  and  de- 
mand. 

By  the  inevitable  action  of  nature's  law  of  supply  and 
demand,  if  of  late  years  there  has  been  a  scarcity  of 
currency  to  carry  on  our  trade  with,  money,  owing  to 
the  supply  not  being  equal  to  the  demand,  would  have 
been  more  difficult  to  obtain,  and,  therefore,  a  higher 
price  asked  for  its  use.  Has  this  been  the  case  ?  No  ; 
money  has  been  getting  cheaper.  The  average  rate  of 
discount  in  Great  Britain  for  1851-60  was  4.17  per 
cent.  ;    1861-70,    4.23  ;    1871-80,    3.28   per    cent.  ;    the 


PAPER  MONEY,   BANK  NOTES,    CHECKS.       69 

average  value  for  1881-90  will  be  under  3  per  cent. 
Why  is  this  ?  Because  of  the  fact  that  "  the  quantity  of 
coin  necessary  to  any  country  depends  on  neither  popu- 
lation nor  trade."  In  Great  Britain  jT^df  per  inhabitant 
is  enough,  but  in  France  they  require  £^%.  Two  of  the 
poorest  countries  in  Europe — namely,  Spain  and  Portu- 
gal— have  the  largest  amount  of  metallic  money  com- 
pared to  their  commerce.  To  do  without  the  vulgar 
idea  of  money — metallic  coin — is  evidence  of  civilization; 
in  London,  99  per  cent,  of  the  daily  payments  is  made 
by  checks.  The  clearing-house  returns  for  London  for 
1881-4  average  26  millions  sterling  per  day,  all  done  by 
paper,  gold  not  being  wanted  ;  what  necessity  is  there 
for  silver  ? 

PAPER  MONEY,  BANK  NOTES,  CHECKS. 

Bank  notes  were  invented  to  perform  the  same  work 
as  coin  ;  but  let  me  impress  upon  you  that  coin  alone  is 
currency,  and  that  the  use  of  bank  notes  is  to  supple- 
ment the  action  of,  to  represent  coin  ;  the  same  being 
taken  upon  the  distinct  understanding  that  the  Bank  of 
England  and  other  banks  that  issue  notes  will  convert 
the  same  into  gold  for  the  holder  when  asked  to  do  so, 
is  one  thing  ;  but  treating  bank  notes  even  of  the  Bank 
of  England  as  currency,  as  coin  itself,  is  another  matter 
altogether. 

Paper  money  is  useful  for  home  purposes,  being  con- 
venient and  economical  ;  an  addition  to  the  circulating 
medium  that  the  world  could  not  do  without  to  effect  its 
present  bulk  of  exchanges,  the  work  of  distribution  ; 
but  the  people  must  not  forget  that  it  is  but /«/^/',  cancels 


7d  MO  ME  Y. 

no  debt,  effects  no  real  transfer  of  property, — as  it  is  not 
money,  but  only  a  promise  to  pay  money,  and,  until  cashed 
by  the  banker,  of  no  more  intrinsic  value  than  the  paper 
it  is  written  on. 

So  you  will  please  confine  currency  to  coin,  and 
always  treat  of  paper  as  paper  money — a  most  useful  in- 
strument for  making  transfers  and  exchanges,  but  of  no 
real  intrinsic  value  until  you  have  obtained  for  it  cur- 
rency coin  of  the  value  it  represents  ;  next  in  importance, 
but  not  equal,  to  the  coin  itself.  Both  act  as  money  when 
they  are  kept  by,  and  stay  in  the  hands  of,  the  public. 

How  few  people  properly  appreciate  the  value  of 
checks,  the  most  important  species  of  "  paper  money  " 
ever  introduced — the  money  of  intelligence,  the  indica- 
tion of  civilization  !  It  is  the  general  impression  that 
"bankers"  are  dealers  in  money;  but  an  ordinary 
banker  does  not  deal  in  money,  in  cash,  in  sovereigns, 
and  bank  notes.  Sir  John  Lubbock  gave  an  analysis  of 
a  sum  of  ^19,000,000  paid  into  his  bank  :  it  was  com- 
posed of  : 

Checks  and  bills ;,f  18,395,000 

Notes 487,000 

Coins 118,000 

;!^I9,000,000 

You  will  perceive  that  "  three  per  cent."  only  of  the 
whole  amount  was  paid  in  cash,  and  only  "  one  half  per 
cent.,"  or  one  in  every  ;^2oo,  paid  in  in  coin.  "  Money  " 
— metallic  money, — therefore,  forms  but  a  very  small 
item  in  a  banker's  daily  transactions  ;  97  per  cent,  of  his 
daily  receipts  being  composed  of  checks  and  bills.  A 
more  convincing  proof  of  the  value  of  "  system "  it 
would  be  impossible  to  find  than  "  banking  "  and  the 
"  clearing-house."     Banking  does  away  with  the  neces- 


PAPER   MONEY,   BANK  NOTES,    CHECKS.        "Jl 

sity  for  "  coined  money."  A  has  money,  or  an  amount 
to  his  "  credit,"  at  the  London  and  Westminster  Bank  ; 
B  has  the  same  at  the  Union  Bank.  A  owes  C  a  sum  of 
money,  he  pays  it  by  a  check  on  his  banker  ;  B  owes  D 
a  sum  of  money,  he  pays  it  in  the  same  manner.  The 
amounts  are  simply  transferred  from  "  one  banker's 
ledger  to  another  "  ;  so  that  banking  is  really  an  institu- 
tion for  the  collection  of  debts,  in  the  shape  of  bills, 
checks,  dividend  warrants,  coupons.  The  people  hand 
to  their  banker  their  claims  to  collect,  and  these  claims 
are  sent  in  daily  to  the  clearing-house  by  the  different 
bankers.  The  clerks  there  ascertain  the  value  of  the 
claims  sent  in  by  one  banker,  and  the  value  of  those  sent 
in  by  the  other  banker  against  him  ;  a  balance  is  struck, 
and  the  banker  who  has  to  pay  a  balance  gives  a  check 
for  it  upon  the  Bank  of  England.  The  following  figures 
give  the  totals  of  the  "  clearing-house  "  for  the  first  six 
months  of  1878  and  1879,  and  furnish  the  most  unmis- 
takable evidence  of  the  value  of  thought  and  method  in 
human  affairs.  Please  remember,  by  this  method  these 
figures  prove  that  debts  were  collected  in  six  months  of 
the  value  of  "  two  thousand  five  hundred  and  sixty  mil- 
lions one  hundred  and  twenty-six  thousand  pounds,"  by 
means  of  checks  and  bills,  not  a  note  or  gold  coin  being 
wanted  for  the  settlement ;  "  it  was  simply  a  transfer  " 
of  debts  from  one  banker's  ledger  to  another,  for  the 
following  gigantic  totals  : 


187S. 

January ;^448,48o,ooo 

February 407,607,000 

March 442,887,000 

April 412,348,000 

May 428,052,000 

June 420,752,000 

j^2, 560, 1 26,000 


1879. 

January ;i{^42i,892,ooo 

February 369,584,000 

March 402,752,000 

April 409,767,000 

May 432,779,000 

June 384,390,000 


;^2, 421, 164,000 


72  MONE  Y. 

The  above  is  a  proof  of  my  assertion  that  the  subject 
of  "  money "  is  not  understood.  We  hear  daily  of 
money  being  abundant  or  scarce  ;  whereas  money — that 
is,  gold,  sovereigns,  notes — varies  very  little  indeed. 
What  should  be  told  to  the  people  is,  that  "  checks " 
are  abundant  or  scarce.  The  fact  is  always  overlooked 
that  borrowing  and  lending,  buying  and  selling,  takes 
place  by  an  exchange  of  debts.  A  banker  receiving 
many  bills  and  checks  to  collect  will  lend  freely,  and  at 
a  low  rate  ;  but  if  more  bills  and  checks  are  drawn  upon 
him  than  are  sent  in  for  him  to  collect,  he  is  less  willing 
to  lend,  raises  difficulties,  asks  a  higher  rate  of  discount, 
does  all  he  can  to  check  the  demand,  and,  by  increasing 
the  rate  of  interest  he  allows  to  depositors,  tries  to  in- 
crease his  supply. 

At  present  a  banker  thinks  only  of  gold  to  replenish 
his  reserves  ;  he  does  not  see  that  the  reserve  dwindles 
away,  because  the  receipts  which  feed  it  are  diminishing  ; 
he  overlooks  the  fact  that  gold  figures  for  only  "  one 
two-hundredth  part  "  in  the  daily  returns,  and,  therefore, 
that  its  variation  in  the  total  receipts  is  not  the  cause  of 
his  inability  to  lend  at  one  time  less  freely  than  at 
another.  Trade  being  good,  should  make  no  difference. 
What  does  it  matter  if  the  "  clearing-house  "  return  be 
IOC  or  200  millions  per  week  ?  No  more  gold  is  needed 
for  the  settlement  of  business  transactions  represented 
by  the  larger  than  for  the  smaller  sum.  Bad  times  can 
only  be  remedied  by  increased  production  ;  a  banker's 
reserve  can  only  be  legitimately  increased  by  his  connec- 
tion increasing,  or  by  his  customers  increasing  their 
means.  The  American  war  caused  the  people  to  produce 
less  ;  they  bought  less.    With  every  diminution  of  trade, 


PAPER   MONEY,    BANK  NOTES,    CHECKS.        73 

there  is  a  corresponding  diminution  of  profit.  A  banker's 
resources  dwindle  away,  he  receives  less,  the  demands 
upon  him  are  greater  than  the  sums  given  him  to  collect  ; 
he  has  to  sell  or  call  in  loans  upon  securities  ;  and  there 
is  a  cry  that  gold  is  getting  scarce.  But  whilst  the 
merchants  and  the  bankers  are  in  agonies  about  gold,  it 
is  not  gold  that  fails,  but,  as  Adam  Smith  long  ago 
remarked,  "  the  means  wherewith  to  buy  it."  It  is  not 
gold  but  capital  which  is  in  disorder.  In  the  worst 
crises  gold  is  always  to  be  had,  but  not  the  loan  of  gold. 
Loans  are  dearer,  but  gold  remains  stationary  in  value. 
Outside  the  financial  world,  the  buying  power  of  gold 
in  relation  to  land  and  property  continues  unchanged. 
You  may  say  that  the  prices  of  commodities  fall  during 
a  crisis,  but  then  that  happens  because  so  many  have 
become  suddenly  poorer,  and  can  no  longer  afford  to 
consume  and  buy  as  freely  or  recklessly  as  before  ;  or 
because  the  dealers  in  these  commodities  are  obliged  to 
make  concessions  in  order  to  force  sales,  owing  to  their 
want  of  judgment  in  buying  too  largely  in  proportion 
to  their  capital,  and  being,  therefore,  compelled  to  get  the 
capital  of  others  even  at  a  great  loss.  But  "  currency  " 
has  nothing  to  do  with  this.  The  panic  under  our 
present  system  must  be  referred  to  "  capital  "  and  "  busi- 
ness "  capacity,  trading  as  though  experience  had  not 
shown  that  in  times  of  panic  a  large  number  of  the  peo- 
ple desire  to  keep  their  money  in  their  own  hands,  and 
are  not  disposed  to  leave  it  in  the  hands  of  bankers  for 
the  use  of  traders  as  heretofore. 

What  is  wanted  is  a  system  that  will  abolish  this  want 
of  confidence  at  certain  periods.  The  people  must  be 
taught   how   valuable   "  bankers  "    are  :    a    machine    of 


74  MONE  Y. 

superlative  cheapness  and  efficiency,  as  it  bears  also  the 
most  decisive  evidence  to  the  public  order,  the  sense  of 
security,  the  supremacy  of  law,  and  the  intelligence  of 
the  society  in  which  it  is  freely  used.  In  combination 
with  the  clearing-house,  it  dispenses  with  gold  and  paper 
currency  almost  entirely.  Within  its  own  sphere  the 
"  check "  buys  and  sells  with  equal  facility  with  the 
sovereign  ;  it  does  the  work  of  the  precious  metals,  is  a 
more  secure  method  of  payment,  and  brings  in  a  large 
amount  of  revenue.  Its  power  is  immense  ;  and  instead 
of  watching  so  closely  the  movements  of  gold  and  notes, 
the  people,  aye,  and  bankers  also,  should  watch  more 
closely  the  "  clearing-house  returns."  It  is  the  fluctua- 
tion in  the  "  checks  "  they  have  to  notice,  and  which  in- 
dicates so  unmistakably  the  state  of  trade  ;  it  is  the 
"  check  "  which  brings  the  riches  within  the  portals  of 
the  banker,  and  the  "  check  "  is  the  instrument  on  whose 
wings  it  takes  its  flight  therefrom.  The  barometer  of 
the  commercial  atmosphere  is  the  "  clearing-house " 
daily  returns  ;  the  rising  flood  of  checks  is  a  sign  of  the 
activity  which  is  the  usual  indication  of  the  profitable- 
ness of  business,  as  its  ebb  too  surely  announces  the 
drooping  resources  of  commerce.  Great  is  the  "  note," 
but  far  greater  yet  is  the  check.  It  is  the  "  check  " 
which  constitutes  the  resources  of  the  banker  ;  and  it  is 
the  "  check  " — that  mighty  potentate — that  orders  him 
to  pay,  which  in  times  of  panic  threatens  and  often  ac- 
complishes his  downfall.  In  the  Sartor  of  June,  187 1,  I 
suggested  that  the  post-office  should  issue  "  checks " 
made  out  in  duplicate  by  the  copying  process,  all  payable 
to  order,  and  all  crossed  "  and  Co.,"  all  lettered  Ln.  for 
London,   Mr.   for  Manchester,   and  numbered  consecu- 


PAPER   AfONEV,    BANK'  NOTES,    CHECKS.        75 

lively  for  each  town.  The  postmaster  would  only  have 
to  fill  in  name  of  payee,  and  send  up  duplicates  daily  to 
head  office,  where  all  post-office  checks  would  be  pay- 
able to  bankers  only.  The  checks  to  be  issued  at  risk 
of  payer,  commission  being  "  one  penny  "  for  sums  not 
exceeding  ^os.,  "  twopence  "  for  sums  over  40s.  and  not 
exceeding  ^5,  "  threepence  "  for  over  ^5  and  not  ex- 
ceeding ^10.  That  this  view  is  practicable  is  proved 
by  the  fact  that  in  the  analysis  for  May  8,  1876,  in 
eleven  large  towns  more  than  two  thirds  of  the  money 
orders  were  paid  to  bankers,  and  in  1875  the  orders 
paid  at  the  chief  office  to  bankers  were  ^2,039,775,  and 
to  the  public  only  ^125,918.  We  are  told  by  the  author- 
ities that  the  minimum  cost  of  a  money  order,  whether 
for  5.^.  or  ;^io,  is  the  same — "  threepence."  They  make 
this  out  by  saying  that  id  is  paid  for  every  order  issued, 
and  id.  for  every  order  paid.  Now,  if  two  thirds  of  the 
orders  are  paid  at  the  chief  office  through  bankers,  and 
two  millions,  or  one  eighth,  are  paid  to  bankers  at  the 
chief  office  in  London,  I  want  to  know  if  the  different 
offices  are  credited  with  id.  on  each  of  these  orders,  the 
same  as  if  each  had  been  presented  at  the  respective 
office  and  paid  separately  by  each  postmaster. 

My  object  was  to  introduce  a  less  costly  method  than 
"  money  orders  "  for  transmission  of  money  by  post. 
This  idea  was  adopted  by  the  "  Check  Bank  "  ;  but  the 
checks  of  any  banker  would  not  remain  so  long  in  the 
hands  of  the  public  as  those  of  the  post-office,  which 
might  be  made  a  legal  tender  like  the  Bank  of  England 
or  "national  notes."  Dr.  Lloyd  Fowle,  September  10, 
1878,  submitted  as  "original"  a  similar  plan  to  Lord 
John   Manners  ;  and   Mr.   Edward    S.   Norris    writes  in 


y^  MONE  Y. 

favor  of  "  post-office  checks  "  to  the  Times,  September 
19,  1879,  and  intubates  that  in  1875  he  adopted  the  idea; 
but  as  in  1871  it  was  brought  by  me  before  the  public, 
the  honor  is  due  to  me.  The  "  postal  note,"  submitted 
to  the  "post-office  committee"  in  1877,  was  attributed 
to  Mr.  Chetwynd  ;  but  Mr.  Charles  Green,  editor  of 
the  Sartor,  submitted  to  the  Chancellor  of  the  Exchequer, 
June  I,  187 1,  "that  the  post-office  should  issue  a  series 
of  notes  of  different  values,  capable  by  their  com- 
bination of  representing  any  required  sum,  except  odd 
pence,  for  which  stamps  could  be  used  ;  that  these  notes 
should  be  made  of  the  strongest  material,  and  present 
bold,  easily  recognized  features  ;  that  they  should  be 
obtainable  at  any  post-office  without  charge."  Mr. 
Green  assumes  that  "  post-office  notes  "  would  remain  in 
circulation,  and  be  an  addition  to  our  medium  of  ex- 
change, and  that  the  post-office  authorities  would  gain 
(after  allowing  for  the  cost  of  management)  ^500,000 
per  year.  But  Mr.  Green  overlooks  the  fact,  that  only  so 
much  money  as  is  needed  for  "  change  "  remains  in  the 
hands  of  the  public.  Our  present  currency  is  adequate 
for  supplying  us  with  sufficient  of  the  "  medium  of  ex- 
change." One  note,  the  "national  note,"  is  all  we  re- 
quire or  should  have,  and  if  issued  for  205.  and  40^.,  with 
"postal  checks"  for  \os.,  155-.,  and  20^-.,  stamped  with 
the  usual  penny  stamp,  we  should  get  what  we  require, — 
a  safe  and  economical  method  for  the  transmission  of 
money  by  the  post  ;  the  checks  to  be  paid  into  banks, 
and  the  total  daily  credited  to  the  bankers,  and  debited 
to  the  Postmaster-General's  account  at  the  Bank  of  Eng- 
land. Money-order  telegrams  are  also  much  needed. 
"G.  P,"  in  a  letter  to  the   Times,  Oct.  6,  1878,  mentions 


PAPER  MONEY,    BANK  NOTES,    CHECKS.        TJ 

that  in  France  it  is  possible  to  authorize  by  telegram  the 
payment  at  a  distant  office  of  a  certain  sum  of  money  to 
a  specified  individual,  and  he  asks  why  the  same  facil- 
ities are  not  afforded  to  us  in  England.  As  far  back  as 
1870  Mr.  riatt  brought  this  matter  before  the  Secretary 
of  the  Post-Ofifice,  and  his  letters,  advocating  money- 
order  telegrams,  have  been  inserted  in  the  trade  journals, 
and  also  in  the  Echo  of  January  21,  1871,  October  6, 
1871,  September  28,  1872,  and  March  17,  1875  ;  and  if 
the  system  can  be  carried  out  in  France,  why  not  in 
England  ? 

"  Sixpenny  telegrams "  are  also  much  needed  for 
messages  not  exceeding  ten  words  ;  and  this  and  the  other 
matters  would  have  been  granted  but  for  that  bugbear 
"impossibility,"  with  which  they  met  the  late  Sir  Row- 
land Hill's  idea  of  "  penny  postage,"  and  have  opposed 
all  subsequent  reforms. 

"  With  caution  judge  of  possibility  ; 
Things  thought  unlikely,  e'en  impossible, 
Experience  often  shows  us  to  lie  true." 

Shakespeare. 

There  should  be  no  distinction  between  a  spurious  bank 
note,  a  forged  bill,  and  a  check  given  when  there  are  no 
funds  of  the  drawer  at  the  banker's  to  pay  it.  Each  method 
is  adopted  to  obtain  "  goods  by  false  pretences."  It  is 
absurd  to  tell  a  tradesman  that,  as  he  can  refuse  to  take 
checks  in  payment,  the  law  can  only  regard  it  as  a  credit 
transaction  "  deferred,  not  actual  payment  as  with  coin 
at  the  time  of  purchase."  The  law  may  be  right  logi- 
cally,— the  trader  ought  to  know  that  the  check  is  but  a 
"promise   to   pay,"   witli   no   date  when  specified;  but 


78  MONE  Y. 

practically  a  tradesman  parts  with  his  goods  in  exchange 
for  the  check,  upon  the  assumption  that  the  drawer  has 
given  him  an  order  to  go  and  get  the  value  for  it  ;  and 
as  upon  the  faith  of  the  order  to  receive  so  much  money, 
he  has  parted  with  his  goods,  the  law  ought  to  protect 
the  victim,  and  not  the  thief  ;  the  check  being  taken  as 
a  substitute  for,  but  representing  "  money,"  as  an  order 
for  payment  that  can  be  made  at  once.  A  "  bank  note  " 
is  really  a  check — a  banker's  order  upon  himself, — with 
this  important  distinction,  that  it  "  circulates,"  whereas 
a  check  of  Rothschild's  is  presented  for  payment  be- 
cause it  will  not.  But  still  all  notes  are  "checks,"  and 
this  is  another  proof  that  "  currency  "  is  not  understood, 
and  must  be  considered  as  "  not  understood  "  until 
people  recognize  the  fact  that  "  bankers'  notes,"  even 
though  of  the  Bank  of  England,  are  merely  "  checks," 
promises  to  pay,  drawn  by  a  banker  upon  himself. 
Yet  in  the  height  of  the  greatest  panic,  when  bankers 
are  trembling  for  fear  of  not  meeting  their  liabilities  ; 
when  we  hear  such  harrowing  accounts  of  the  scarcity  of 
"  money  "  ;  that  money  is  not  to  be  had  at  any  price  ; 
yet  the  people  are  so  little  in  want  of  the  "  money " 
which  they  are  raving  for  like  wild  beasts,  that,  not 
knowing  what  money  is,  they  eagerly  take  "bank  notes." 
In  1826,  when  there  was  hardly  a  sovereign  in  the  bank, 
the  public  readily  accepted  even  old  j[^\  notes,  which 
had  been  withdrawn  from  circulation,  and  which  had 
not  been  a  legal  tender  for  four  years  before,  yet  they  took 
them  and  hoarded  them,  forgetting  they  were  but  bits  of 
paper,  and  that  at  all  times  a  banker's  engagement  to  his 
notes  is  identical  with  that  which  binds  him  to  any 
check  from  a  depositor.     Both  are  payable  on  presenta- 


PAPER   MONEY,    BANK  NOTES,    CHECKS.        79 

tion,  when  the  holder  chooses  to  make  his  demand  ;  the 
only  difference  is,  the  greater  probability  of  the  one  being 
presented  rather  than  the  other.  Comprehend  this,  and 
you  will  perceive  the  importance  of  the  currency  laws 
being  altered  so  as  to  increase  this  probability  ;  nay, 
make  it  a  certainty  that  the  "  note  "  will  not  be  pre- 
sented ;  also,  that  bankers  may  feel  secure  that  they  can, 
if  they  have  the  requisite  securities,  obtain  "  notes " 
enough  to  honor  all  checks  that  may  be  presented. 
The  mint  guarantees  the  genuineness  of  the  sovereign. 
The  government  should  have  an  ofhce  for  the  issue  of 
notes  to  bankers  upon  their  depositing  securities  for  the 
repayment  of  the  debts  of  issue  to  the  public.  Notes 
might  be,  would  be,  generally  used,  if  issued  for  one 
pound,  two  pounds,  etc.  Notes  are  not  money  ;  true,  no 
more  are  checks,  which,  I  have  shown  to  you,  take  so 
well  the  place  of  money.  Checks,  however,  cannot  act 
as  "money";  it  is  not  their  province  to  "circulate," 
they  are  intended  to  make  one  payment,  and  no  more  ; 
but  notes  are  used  for  a  number  of  exchanges  before 
being  sent  in  fontpayment,  and  ceasing  to  exist.  Notes 
act  like  coin,  are  taken  the  same  as  coin,  go  from  hand 
to  hand,  are  kept  in  pocket  or  desk  till  needed  like  other 
money,  are  as  familiar  to  all  of  us  as  the  sovereign  ;  in 
many  respects  are  superior  to  the  sovereign,  being  lighter, 
more  easily  carried,  the  best  possible  money  to  be  had  ; 
and  if  my  suggestions  were  adopted,  we  should  be  able 
at  all  times  to  obtain  "  all  the  money  "  we  need.  In 
reply  to  those  who  dread  "  too  many  notes  being  issued  " 
if  paper  money  were  more  generally  adopted,  this  cannot 
be  with  "  convertible  notes."  With  notes  as  with  coin, 
as  Mr.  Bonamy  Price  says  :  "  So  many  bank  notes  as  the 


So  MO  ME  Y. 

public  want  and  can  use  will  circulate,  and  no  more. 
Neither  the  bankers,  nor  the  Parliament,  nor  the  law,  nor 
the  need  of  borrowers,  nor  any  other  power  but  the 
wants  and  conveniences  of  the  public,  the  number  and 
amount  of  the  specific  payments  in  which  bank  notes  are 
used,  can  determine  how  many  convertible  bank  notes 
will  remain  in  circulation,  and  not  be  returned  upon  the 
hands  of  the  banker  for  payment.  '  This  is  the  truth  of 
truths  in  currency.'  " 

Checks  are  not  currency,  do  not  run,  since  the  recent 
decision  less  so  than  formerly,  as  it  is  dangerous  to  use 
checks  as  money  ;  they  were  never  intended  as  such, 
being  simply  an  order  from  the  drawer  to  his  banker  to 
pay  a  specified  sum  to  A  B  or  the  bearer,  and  now  gen- 
erally by  all  prudent  men  are  marked  as  soon  as  they 
receive  them,  not  negotiable.  They  should  be  paid  into 
the  bank  to  have  the  transfer  made,  or  be  cashed  as  soon 
as  possible.  A  bill  of  exchange  is  slightly  more  current ; 
as  it  passes,  like  other  tools  of  exchange,  through  a  few 
hands  by  being  endorsed  ;  but  its  run  is  limited,  as  it  has 
a  fixed  day  for  payment.  Checks  and^bills  need  care — 
we  do  not  take  them  from  strangers  ;  hence  they  are  not 
money  in  the  popular  sense,  not  being  things  like  bank 
notes,  or  gold,  that  every  one  takes  as  a  matter  of  course. 
It  is  to  be  regretted  that  bank  notes,  checks,  bills,  are 
called  money.  Even  Mr.  Bagehot,  in  his  "  Lombard 
Street," — written  expressly  to  explain  the  money  market 
as  being  as  concrete  and  real  as  any  thing  else  capable 
of  being  described  in  as  plain  words,  so  that  it  is  the 
writer's  fault  if  what  he  says  is  not  clear, — gives  six 
different  meanings  to  the  word  "  money  "  ;  whereas  coin, 
metallic  coin  alone,  is   true  money,  and  every  kind  of 


PAPER  MONEY,   BANK  NOTES,    CHECKS.       8 1 

paper  money  extant  is  but  an  order  to  A  B  to  pay  money, 
or  a  promise  by  B  A  to  pay  money.  Its  value  is  in  the 
order  or  promise  ;  and  an  order  or  promise  is  not  the 
thing  itself, — the  thing  is  absent, — the  paper  is  intrinsi- 
cally valueless  ;  if  the  check  be  dishonored  or  the  bank 
fails,  he  has  got  nothing  for  the  wealth  he  gave  for  it ; 
whereas  in  the  gold  he  gets  a  property,  a  metal  as  valua- 
ble as  the  article  he  has  sold. 

Mr.  Bonamy  Price,  in  "  Currency  and  Banking,"  puts 
the  matter  very  clearly.  "  If  checks  and  bank  notes  are 
true  money,  then  so  are  spoken  words,  for  they  can  pur- 
chase property,  and  bind  the  buyer  at  law  just  as  strongly 
as  a  check.  To  tell  a  bookseller  to  put  five  pounds'  worth 
of  books  to  his  account,  commits  the  buyer  to  payment 
as  completely  as  a  check.  Coin  is  the  substance,  the 
reality  covenanted  to  be  given  for  goods  bought ;  conse- 
quently coin  alone  is  payment.  Every  thing  else,  bank 
notes,  checks,  warrants,  are  nothing  but  title-deeds,  evi- 
dence good  at  law  to  compel  the  stipulated  payment  in  coin, 
if  not  voluntarily  given.  Without  a  court  of  law  in  the 
background,  they  are  only  acknowledgments  resting  on 
honor,  and  may  at  any  moment  prove  to  be  empty 
writing.  Coin  pays ;  no  form  of  paper  does  till  what  is 
written  upon  it  is  fulfilled.  A  bank  note  is  not  property 
placed  in  a  man's  hands  ;  every  seller  may  decline  to  take 
it.    If  the  bank  fails,  the  holder  will  never  be  paid  at  all." 

The  truth  that  bank  notes  are  not  money  received  a 
remarkable  confirmation  from  an  elaborate  judgment^ 
delivered  in  the  Supreme  Court  of  the  United  States  ; 
and  the  careful  reading  and  thinking  over  this  will 
explain  the  weakness  of  "  inconvertible  "  paper  money. 

The  question  which  presented  itself  for  final  decision 


82  MONE  V. 

was  whether  debts  which  had  been  contracted  previously 
to  the  act  of  Congress  which  made  the  inconvertible 
bank  notes  called  greenbacks  legal  tender,  were  dis- 
charged by  the  tender  of  these  notes.  Nothing  could  be 
sounder  or  more  admirable  than  the  doctrine  laid  down 
by  Chief-Justice  Chase.  He  ruled  that  such  debts  were 
contracts  to  deliver  money,  and  that  bank  notes  were  not 
money,  and  could  not  be  forced  upon  a  creditor  as  a 
satisfaction  of  his  claim. 

The  distinction  that  coin  alone,  the  metallic  dollar, 
was  money,  was  most  sharply  and  accurately  drawn,  and 
the  right  of  the  creditor  to  the  covenanted  payment  was 
clearly  established.  A  bank  note  was  pronounced  not  to 
be  payment ;  it  did  not  fulfil  the  contract  entered  into 
to  deliver  money.  The  case  was  wholly  different  with 
debts  contracted  subsequently  to  the  enactment  of  the 
law  which  declared  greenbacks  legal  tender.  The  cred- 
itor had  been  distinctly  warned  beforehand  that  the 
word  "  dollar  "  would  be  understood  by  the  law  to  mean 
that  particular  piece  of  paper  which  contained  an 
acknowledgment  of  debt  due  by  the  government  of 
the  United  States.  He  knew  when  he  gave  credit  on  an 
undertaking  to  be  repaid  in  dollars  that  he  would  receive, 
not  money,  but  the  transfer  of  a  debt,  expressed  on 
paper  which  was  due  by  the  government.  He  did  not 
stipulate  for  money,  and  consequently  money  he  was 
not  entitled  to,  and  would  not  receive.  He  would  get 
dollars,  as  interpreted  by  the  law  of  legal  tender,  not  the 
metallic  dollars  which  are  money,  but  a  promise  made 
by  the  government  to  pay  suc/i  dollars  without  any  stipu- 
lation as  to  the  time  when  they  would  be  given.  It  was  for 
him  to  consider  when  he  gave  away  his  goods  what  the 


PAPER  MONEY,    BANK  NOTES,    CHECKS.        83 

promise  of  a  dollar  or  the  pieces  of  paper  might  be 
worth  in  the  stores. 

Nevertheless,  though  bank* notes  are  not  money,  it  is 
hopeless  to  try  to  strip  them  of  that  title.  When  the 
bank  notes  are  established  in  public  confidence,  it  is 
impossible  to  maintam  the  distinction  between  them  and 
coin  in  popular  language.  Mixed  together  in  the  same 
purse,  the  common  heap  is  regarded  as  money.  They 
both  do  the  same  work,  both  circulate  and  purchase  with 
equal  ease,  both  raise  no  other  idea  than  tliat  they  are 
money  to  buy  with.  The  radical  distinction,  however, 
between  them,  that  coin  makes  a  real  payment  and  notes 
do  not,  is  of  the  utmost  scientific  importance  ;  the  dif- 
ference meets  the  inquirer  at  evey  turn  in  examining  the 
nature  and  action  of  bank  notes. 

Paper  money,  out  of  its  own  country,  in  many  cases 
carries  no  value  at  all.  Bank  of  England  notes,  indeed, 
which  have  the  same  prestige  over  other  kinds  of  paper 
money  which  the  sovereign  has  over  other  coins,  may  be 
cashed  without  difficulty  in  Paris,  Vienna,  and  other 
large  cities,  and  at  no  greater  charge  than  is  made  for 
converting  sovereigns  into  French  money.  Indeed,  as 
neither  sovereigns  nor  Bank  of  England  notes  will  circu- 
late abroad,  and  have  to  be  sent  back  to  England  before 
the  foreign  holder  receives  value  for  them,  the  notes  are 
fully  more  acceptable  than  the  sovereign,  seeing  that 
they  can  be  transmitted  to  England  for  the  mere  cost  of 
postage.  Convince  a  continental  money-changer  that 
the  English  bank  note  is  genuine,  and  he  will  give  you 
cash  for  it  as  readily  as  for  our  metallic  money  ;  although 
of  course  there  is  this  difference — that  coins  can  be 
tested  anywhere,  their  value  is  in  themselves ;  whereas 


84  MONE  Y. 

bank  notes,  even  of  the  Bank  of  England,  in  foreign 
countries  can  only  be  received  as  genuine  out  of  confi- 
dence in  the  person  wh®  presents  or  indorses  them. 
All  paper  money  needs  this  guaranty  of  its  genuineness, 
that  the  promise  on  the  face  of  it  will  be  kept.  The 
Scotch  prefer  paper  money,  as  being  in  their  opinion 
cheaper,  safer,  and  more  convenient  for  currency  than 
the  sovereign  ;  but  their  notes  do  not  circulate  out  of 
the  kingdom.  We  receive  them  daily,  but  always  send 
them  to  the  bank  of  issue  and  get  gold  in  exchange. 
The  same  with  notes  of  the  provincial  banks  ;  these  are 
very  useful  in  the  immediate  neighborhood  of  the  banks 
that  issue  them,  but  they  are  received  with  great  caution, 
if  not  suspicion,  elsewhere.  They  will  not  circulate 
generally,  because  the  public  at  large  are  not  familiar 
with  them,  and  therefore  have  not  the  necessary  confi- 
dence required  before  parting  with  their  gold  or  goods 
in  exchange. 

In  this  country,  the  paper  money  issued  under  legal 
restrictions  by  the  banks  amounts  to  about  ^40,000,000 
sterling  (the  gold  and  silver  money,  whether  in  circula- 
tion or  kept  in  reserve  by  the  banks,  amounts  to  about 
twice  as  much)  ;  and  those  who  are  friendly  to  Peel's 
Act,  like  myself,  contend  that  it  secures  the  convertibility 
of  the  Bank  of  England  note.  By  the  phrase  "  securing 
the  convertibility  of  the  note,"  it  is  not  meant  that  the 
issue  department  of  the  bank  of  England  held  a  suffi- 
cient amount  of  gold  and  silver  to  pay  off  all  the  notes 
it  had  issued.  The  bank  is  allowed  to  issue  notes  against 
the  value  of  government  securities  that  it  holds,  say  fif- 
teen millions  ;  so  it  is  obvious  that  the  amount  of  gold 
and  silver  must  always  be  less  by  this  amount.     But  by 


PAPER  MONEY,    BANK  NOTES,    CHECKS.        85 

"  securing  the  convertibility  of  the  note  "  is  meant,  that 
the  issue  department  of  the  Bank  of  England  is  in  a  con- 
dition to  pay  off  any  amount  of  notes  of  which  payment 
was  likely  to  be  demanded  for  the  purpose  of  exporting 
the  gold.  What  they  have  to  be  prepared  for  is  to  be 
always  ready  to  meet  a.T\y  foreign  demand  for  gold.  This 
is  called  "  securing  the  convertibility  of  the  note."  The 
principle  is  correct,  and  1  fail  to  see  why  the  Bank  of 
England  should  not  have  additional  power,  and  be  per- 
mitted to  issue  notes  to  any  amount  the  nation  needs, 
upon  the  same  conditions  that  she  issues  the  fifteen 
millions  ;  and  I  see  no  reason  why  the  joint-stock  banks 
and  provincial  banks,  or,  briefly,  any  banker,  should  not 
be  allowed  to  issue  notes  upon  the  same  conditions,  de- 
positing government  or  other  securities  to  the  value 
thereof,  the  same  to  be  stamped  when  issued,  or  paying, 
as  now,  a  tax  to  government  upon  the  notes  so  issued. 
By  this  means  we  should  obtain  always  a  plentiful  supply 
of  money  for  all  internal  purposes  ;  the  nation  would 
make  a  profit  to  help  in  reduction  of  taxation  ;  and  the 
principal  causes  of  pressure  that  caused  the  suspend- 
ing of  the  act,  as  in  1847,  1857,  and  1866,  would  be  re- 
moved. At  present,  when  the  exchanges  are  favorable, 
gold  is  imported.  The  bank  is  compelled  to  issue  notes 
against  this  bullion,  thus  increasing  the  circulation  and 
lowering  the  rate  of  mterest ;  this  leads  to  speculation  ; 
these,  co-operating  with  other  causes,  soon  turn  the  ex- 
changes. Notes  are  taken  to  the  bank,  and  gold  de- 
manded, for  the  purpose  of  being  exported.  This 
contraction  of  the  circulation  of  notes  produces  pressure, 
and  the  apprehension  of  further  pressure  produces  panic. 
It  is  stated  that  during  the  pressure  of  1S47,  notes  to  the 


86  MONE  Y. 

amount  of  ;^4, 000,000  were  hoarded  under  the  influence 
of  panic.  It  is  difficult  to  state  where  prudence  ends  and 
panic  begins.  That  there  is  no  real  necessity  for  them, 
that  they  produce  an  incalculable  amount  of  ruin  and 
misery,  is  certain  ;  and  if  the  Act  of  1844  was  enlarged, 
so  that  notes,  upon  depositing  the  requisite  security, 
could  be  had  for  any  amount,  and  panics  be  avoided,  the 
change  would  be  a  national  blessing. 

I  have  an  implicit  faith  that  "  there  is  a  remedy  for 
every  ill  that  flesh  is  heir  to  "  ;  and  that  the  ills  are  in- 
tended by  nature  to  make  us  exert  ourselves  to  remove 
their  causes.  Our  Currency  Act  should  be  so  framed 
that  at  all  times,  more  especially  in  times  of  panic,  the 
people  may  be  certain  that  any  amount  of  money  can  be 
had  by  those  who  have  the  requisite  securities  to  deposit 
for  the  same.  It  is  the  dread  of  not  being  able  to  get 
the  money  that  causes  half  the  mischief  ;  and  it  is  folly 
to  go  on  trusting  in  time  of  need  to  suspend  the  operation 
of  the  Bank  Charter  Act.  When  an  act  is  suspended,  it 
must  be  either  to  remove  an  evil  which  the  act  has  pro- 
duced, or  to  prevent  an  evil  which  the  act  may  produce. 
But  it  is  in  our  power,  and  as  prudent  men  it  is  impera- 
tive upon  us  to  use  the  power  we  have,  to  adapt  the  act 
for  all  times  ;  we  ought  to  have — considering  the  great 
interests  at  stake,  and  the  overwhelming,  irremediable 
evil  an  inefficient  circulating  medium  causes — an  act 
adapted  for  all  times,  and  so  provide  against  panics  in 
the  present  or  the  future.  If  panics  are  caused  by  the 
act,  let  the  act  be  altered  ;  if  not,  it  cannot  be  wise  to 
suspend  the  operation  of  the  act  ;  but  the  real  cause 
should  be  found  out  and  removed.  Currency  has  its 
laws  ;  these  must  be  understood  better  generally  ;  the 


PAPER  MONEY,   BANK  NOTES,    CHECKS.        87 

fluctuations  are  known  by  a  banker,  and  expected  as 
naturally  as  a  farmer  expects  a  recurrence  of  the  seasons. 
The  fallacy  is  in  assuming  that  the  nation  is  on  the  road 
to  ruin  or  to  prosperity  because  the  circulation  is  higher 
or  lower  this  month  than  in  the  preceding  month.  The 
circulation  of  the  Bank  of  England  is  affected  by  the 
payment  of  the  public  dividends.  The  country  circula- 
tion is  affected  by  the  price  of  corn  ;  The  Bank  of  Eng- 
land by  the  amount  of  her  bullion.  How  absurd  to 
expect  that  these  should  at  all  times  correspond  !  Even 
had  we  but  one  bank  of  issue  for  the  whole  nation,  a 
constant  conformity  between  the  London  and  provin- 
cial circulation  could  never  be  maintained.  An  importa- 
tion of  gold  would  expand  the  London  circulation,  and 
an  exportation  of  gold  would  contract  the  London  circu- 
lation. But  the  country  circulation  would  never  expand 
and  contract  in  immediate  conformity,  and  in  certain 
seasons  of  the  year  would  show  a  progress  in  an  opposite 
direction. 

Banking  has  economized  enormously  the  wealth  of 
every  country  in  which,  like  our  own,  the  system  has 
been  well  developed.  Strange  to  say,  in  London,  the 
city  of  gold,  gold  is  but  little  seen.  We  know,  by  official 
returns,  that  so  many  millions  of  gold  lie  in  the  vaults  of 
the  bank,  and  we  infer  that  a  few  thousands  of  sovereigns 
are  kept  in  each  of  the  other  banks,  as  small  change  for 
their  customers'  wants.  But  the  precious  metal  itself 
makes  no  appearance  in  the  immense  daily  transactions 
of  our  city  of  gold.  Bits  of  paper,  with  some  writing  on 
them,  are  the  potent  agents  of  the  scene.  Paper,  paper 
everywhere  ;  but  no  gold,  not  even  bank  notes.  You  go 
to  buy  some  shares,  you  see  the  rate  they  are  quoted  at, 


88  MONE  y. 

and  commission  your  broker  to  buy.  The  broker  goes 
into  the  busy,  crowded  room  of  the  Stock  Exchange, 
finds  or  calls  out  for  some  one  who  has  shares  of  the  kind 
to  sell,  makes  a  bargain  at  the  current  rate,  and  brings 
back  either  a  check  or  a  stamped  agreement  to  purchase, 
which  he  hands  to  his  client  ;  coupons  or  certificates  are 
given  on  one  side,  and  a  check  on  the  other.  But  no 
gold — not  even  notes  !  The  same  takes  place  in  the 
Royal  Exchange  and  Mincing  Lane  ;  only  bills  and  prod- 
uce are  there  dealt  in,  instead  of  stocks.  If  you  pay  a 
man,  you  give  him  a  check.  If  you  discount  a  bill,  you 
get  the  produce  in  a  check.  If  you  obtain  a  loan  from 
your  banker  on  stock,  or  by  his  discounting  bills  for  you, 
the  amount  is  placed  to  your  credit,  and  you  tell  your 
creditor  to  draw  on  you,  or  give  him  a  check.  It  is 
really  a  strange  thing  to  contemplate  so  much  wealth 
changing  hands — money  ceaselessly  in  transitu — yet  not 
a  sovereign  to  be  seen.  It  is  but  the  ghost  of  money 
that  occupies  the  city,  or  rather  it  is  money  in  its  most 
civilized  form — convenient  and  inexpensive.  It  is  the 
check  system,  the  credit  system.  And,  after  all,  money 
itself  is  nothing  else  than  a  form  of  credit — a  thing 
(whatever  its  substance)  which  men  by  common  consent 
have  agreed  to  recognize  as  a  definite  symbol  of  wealth, 
— a  representative  of  property. 

The  truth  is,  the  whole  operations  of  this  monetary 
metropolis  would  come  to  a  standstill  if  the  payments 
and  exchanges  of  property  had  to  be  carried  on  in  gold. 
A  single  dealer  sometimes  lends,  or  pays,  or  receives  a 
million  sterling  or  more  in  a  single  day  ;  and  dealings  to 
the  extent  of  several  hundred  thousand  pounds  are  by 
no  means  exceptional  occurrences  on  the  part  of  single 


PAPER  MONEY,    BANK  NOTES,    CHECKS.        89 

individuals.  Many  millions  of  property  are  changing 
hands,  in  loan  or  purchase — in  banks,  discount  houses, 
on  'Change,  or  in  Capel  Court — every  day.  Fancy  what 
it  would  be  if  men  had  to  carry  about  with  them  such  a 
mass  of  gold  !  A  thousand  sovereigns  is  a  burden  which 
few  men  would  care  to  carry  about  with  them  for  a  single 
hour.  What  a  sight,  then,  it  would  be  if  tlie  busy  hive 
had  to  trot  about  thus  laden.  Ants  in  their  hive,  carry- 
ing about  their  eggs  as  big  as  themselves,  would  be  a  joke 
to  it.  And  consider,  too,  what  insecurity  there  would  be, 
what  occasions  for  loss  of  the  precious  coins,  what  temp- 
tations to  theft  and  robbery,  if  the  transactions  in  this  busy 
place  were  so  conducted  !  It  would  be  quite  impossible 
to  carry  about  such  a  mass  of  gold  as  would  be  needed  to 
liquidate  the  engagements  which  daily  take  place.  Still 
more,  even  if  it  were  possible  to  carry  about  these  loads 
of  gold,  the  gold  itself  in  such  quantities  could  not  be 
procured.  Happily,  the  yellow  metal  is  not  wanted. 
Checks,  bills  of  exchange,  and  bank  notes  are  found  to 
be  equally  valuable  and  negotiable  ;  they  represent 
property  quite  as  reliably  as  gold,  besides  being  infinitely 
more  portable,  safe,  and  convenient.  And  hence  they, 
or  rather  bills  and  checks,  constitute,  to  all  intents  and 
purposes,  the  only  currency  on  'Change  and  throughout 
the  monetary  city.  By  means  of  them  transactions  to 
the  extent  of  many  millions  take  place  daily  without  a 
single  sovereign  or  even  bank  note  being  visible. 

Yet  gold,  though  not  visible,  is  the  presiding  spirit. 
The  power  of  paper,  its  very  existence  as  a  medium  of 
exchange,  the  enormous  sums  it  so  easily  transfers, — all 
its  operations  depend  upon  the  presence  of  gold  in  one 
part  of   the   locality — in    the    Bank   of    England.     The 


90 


MONE  Y. 


thousands  who  daily  operate  never  see  it.  But,  visible 
or  invisible,  its  presence  and  amount  regulate  the  opera- 
tions of  the  bank,  and  those  operations  regulate  and 
affect  all  the  other  operations  of  the  precinct.  Accord- 
ing to  the  weekly  report  of  the  officials  as  to  the  quantity 
of  gold  lying  hid  in  the  strongest  chambers  of  the  bank, 
the  value  of  stocks  and  shares  rises  and  falls  ;  high  or 
low  rate  of  interest,  panic  or  prosperity,  occur,  according 
as  much  or  little  of  the  yellow  dross  is  reported  to  be  in 
the  occult  chambers  of  Threadneedle  Street.  The  vital 
point  in  the  day's  monetary  news  are  the  lines  that  tell  us 
how  much  gold  has  been  taken  to  or  withdrawn  from  the 
bank,  as  the  movements  of  the  precious  metal  regulate 
the  bank  rate  of  discount  ;  and  although  the  leading 
joint-stock  banks  now  act  independently  of  the  bank, 
and  regulate  the  rate  according  to  their  power  of  lend- 
ing, still  the  bank  rate  is  the  principal  regulator  of  the 
rate  of  discount,  as  it  indicates  the  supply  of  or  demand 
for  gold.  As  before  intimated,  I  think  something  should 
be  done  to  remedy  this,  and  prevent  the  great  fluctuations 
the  rate  of  discount  is  now  subject  to.  The  price  of 
money  depends  on  supply  and  demand  ;  bankers,  and  all 
dealers  in  money,  like  a  high  rate — the  trading  classes  do 
not.  To  my  mind,  two  per  cent,  is  as  bad  as  six,  the  one 
being  as  much  too  low  to  pay  for  the  use  of  money  as  the 
other  is  too  high  ;  the  rate  must  fluctuate.  But  there  is 
not  sufficient  reason  for  the  extreme  rates  up  and  down 
in  every  twelve  months  that  we  now  experience — varia- 
tions only  justifiable  upon  the  assumption  that  every  one 
had  literally  to  meet  their  payments  in  gold,  which  at 
times  may  not  be  easily  procurable  ;  but  it  is  not  so. 
Bank  of  England  notes  answer  every  purpose  equally  as 


PAPER   MONEY,   BANK  NOTES,    CHECK'S.        9 1 

well,  and  can  be  manufactured  in  any  quantity.     There 
is  no  reason  whatever  to  alter  the  principle  of  the  Bank 
Charter  Act  of  1844;  but  why  ^15,000,000  should  be 
the  maximum  sum  for  the  Bank  of  England  to  be  allowed 
to  issue  her  notes  against  security  I  fail  to  see.      On  the 
contrary,  there  is  every  reason  why  a  sum  that  was  suffi- 
cient to  meet  the  needs  of  1844  should  be  altered  to  meet 
the  larger  needs  of  1880.    It  is  simply  absurd,  when  trade 
is  good,  that  our  operations  should  be  limited  because  of 
the  scarcity  of  gold.    It  is  impossible  for  gold  to  increase 
in  proportion  to  the  nation's  needs.    "  Money  "  will  show 
you  there  is  no  need  for  more  "  gold."    Let  the  trade  of  the 
nation  increase  to  any  extent  ;  the  exchanges,  however 
large,   may   be   made  by  checks,   bills,   banks,   and   the 
clearing-house.     We  only  want  the  Currency  Act  altered 
so  as  to  permit  the  Bank  of  England  or  government  to 
increase  the  note  issue  to   any   extent,  proper  security 
being  left  for  the  same.     If  we  found  in  times  of  panic 
that  people  lost  faith  in  the  notes,  and  all  wanted  gold, 
there  would  be  some  reason  for  our  timidity  upon  this 
subject  ;  but,  as  a  matter  of  fact,  no  such  loss  of  confi- 
dence   has    ever   occurred.     People    take    the    notes   as 
readily  when  the  stock  of  gold  is  low  as  when  the  bank's 
coffers  are  overflowing  with  the  precious  metal.      The 
notes  serve  their  purpose  as  money  quite  as  well  as  gold 
does,  and  the  public  greatly  prefer  them  as  a  means  of 
internal    circulation,   as    a    means    of    settling   accounts 
among  themselves.    Bank  of  England  notes  are  accepted 
everywhere  and  at  all  times  as  preferable  to  specie.     It 
has  always  seemed  to  me  a  great  pity  we  have  not  notes 
for  jQi,  ^2,  ;^3,  ^4  ;  they  are  very  convenient  ;  and  it 
would  make  the  poorer  classes  familiar  with  paper  money 


92  MONE  Y. 

if  they  were  paid  their  wages  in  paper  money.  With  the 
middle  and  upper  classes,  paper  money  is  always  pre- 
ferred— a  check  being  preferred  to  any  thing  else,  al- 
though only  an  order  to  pay  and  not  a  legal  tender 
at  all. 

Gold  must  be  the  basis  of  our  money,  but  it  is  unneeded 
in  our  monetary  transactions  with  one  another.  And  it 
is  an  insult  to  our  common-sense,  as  a  practicable  peo- 
ple, to  get  in  such  a  state  of  alarm  at  every  diminution 
of  our  stock  of  gold,  because  the  Bank  of  France,  or  any 
other  foreign  bank,  buys  up  bills  of  exchange  upon  Lon- 
don, and  sends  them  here  to  be  cashed,  in  order  to  supply 
itself  with  gold  from  the  stock  kept  in  hand  by  the  Bank 
of  England  ;  or  it  may  be  our  own  government,  which, 
by  making  loans  to  a  foreign  state,  necessitates  a  corre- 
sponding export  of  the  precious  metal  ;  or  which,  in 
times  of  war,  has  to  export  specie  to  provide  supplies  for 
its  army  abroad.  It  may  be  our  corn  merchants  import- 
ing grain  to  make  up  for  a  deficient  harvest  here  ;  or  our 
manufacturers  who  purchase  the  raw  materials  of  their 
industry  ;  or,  finally,  it  may  be  great  capitalists,  great 
money  dealers,  who  convert  their  money  into  gold  or 
silver  as  best  suits  their  purpose  for  the  time,  and  who 
transfer  it  from  one  country  to  another,  wheresoever 
they  can  make  the  largest  profits  upon  it.  It  is  these 
agencies,  and  not  any  mistrust  of  the  notes,  which  pro- 
duce the  occasional  heavy  demands  for  gold  upon  the 
Bank  of  England.  These  causes  will  always  be  in  opera- 
tion ;  we  are  aware  of  them,  yet  take  no  steps  to  prevent 
their  operation  every  ten  years  or  so  ;  causing  a  convul- 
sion which  spreads  terror  throughout  the  city,  and  all 
commercial    circles,    paralyzing   the    whole    country   as 


PAPER   MONEY,    BANK  NOTES,    CHECKS.       93 

effectually  as  if  an  earthquake  had  strewed  with  ruins  the 
great  seats  of  our  national  industry.  Trade  is  stopped, 
gains  ruthlessly  swept  away,  suffering  and  want  exist 
nearly  all  over  the  country,  as  if  there  was  a  great  fam- 
ine ;  and  as  a  rule,  this  occurs  just  after  or  when  the 
country  is  fully  occupied  and  prosperous  ;  and  the  only 
reason  is,  we  stupidly  restrict  or  totally  suspend  the  usual 
credit  system  by  which  the  trade  of  the  country  is  car- 
ried on,  because  the  supply  of  gold  in  the  vaults  of  the 
Bank  of  England  is  temporarily  diminished.  We  forget 
at  once  what  credit  and  paper  money  were  invented  for 
— viz.,  to  take  the  place  of  payments  in  coin, — and  have 
not  wisdom  enough  to  be  equal  to  the  occasion,  and  make 
use  of  our  credit  system  as  a  means  of  compensating  for 
the  temporary  absence  of  gold.  Instead  of  doing  so,  to 
tide  over  the  difficulty,  instead  of  having  a  system  that 
gives  greater  expansion  in  the  time  of  need,  ours  restricts 
its  general  operation,  and  makes  every  one  doubt  being 
able  to  get  the  money  they  may  require,  and  so  we  ag- 
gravate the  difficulty  we  are  in  ;  and  so  long  as  we  per- 
sist in  this  course,  so  long  must  the  nation  be  subject  to 
these  periodical  visits  of  commercial  distrust,  and  be 
punished  by  suffering  that  must  inevitably  occur,  unless 
more  elasticity  is  given  to  the  present  system  of  monetary 
legislation. 

Do  not  imagine  I  am  any  speculative  theorist  ;  no  one 
is  more  utterly  averse  to  the  many  remedies  that  have 
been  suggested  to  save  thousands  from  ruin — suffering — 
starvation.  I  am  no  advocate  of  Gray's,  Harvey's,  or  any 
other  remedy,  with  their  consol  notes,  labor  notes,  land 
notes,  inconvertible  notes  ;  but  thoroughly  believe  in  the 
principles  of  the  Bank  Charter  Act,  and  maintain  that  a 


94  MONE  Y. 

metallic  currency  is  the  only  safe  and  reliable  one — that 
it  must  be  distinctly  the  basis  of  all  notes,  bills  of  ex- 
change, checks  ;  that  the  same  are  convertible  into  gold, 
and  that  the  sums  they  represent  are  payable  in  gold 
currency.  But  the  fact  stares  us  in  the  face  that  these 
panics  do  not  arise  from  the  want  of  gold,  but  a  limita- 
tion and  restriction  of  the  ordinary  accepted  currency  of  the 
kingdom,  just  at  certain  junctures  when  the  nation  re- 
quires more  instead  of  less  of  the  circulating  medium  ; 
and  it  can  be  proved  that  a  larger  issue  of  bank  notes  at 
these  periods  stops  the  distrust,  the  blind  fear  that 
creates  panics.  Therefore,  why  not  remove  the  cause 
by  not  limiting  the  issue  of  notes  to  the  stock  of  gold, 
and  a  certain  sum  not  exceeding  ;^i5, 000,000,  upon 
securities  ;  and,  as  they  cannot  be  increased  upon  the 
stock  of  bullion,  alter  the  act  to  any  sum  the  nation 
needs,  if  government  security  to  the  value  thereof  be 
deposited  ?  To  those  who  will  reply.  This  would  destroy 
the  "  convertibility  "  idea,  I  answer,  it  is  only  extending 
the  present  latitude,  and  deny  that  there  is  any  danger  in 
the  suggested  alteration,  as  it  is  extremely  rare  that  the 
drain  upon  the  bank  gold  ever  becomes  so  great  as  to  be 
a  real  and  unavoidable  embarrassment  to  the  bank.  The 
export  of  three  or  four  millions  of  specie  generally  pro- 
duces such  an  effect  upon  the  rate  of  exchange,  as  of  it- 
self to  render  any  further  exports  of  the  kind  unprofit- 
able ;  hence  the  drain  ceases  ;  and,  except  during  a  long 
and  gigantic  contest,  such  as  we  had  with  France  under 
the  First  Napoleon, — an  extremely  exceptional  circum- 
stance— the  drain  of  gold  for  export  has  never  assumed 
a  magnitude  such  as  really  to  imperil  the  position  of  the 
bank.     The  artificial  restriction  of  the  Bank  Act  simply 


PAPER   MONEY,    BANK  NOTES,    CHECKS.       95 

wants  removing,  or  rather  its  power  of  issue  enlarged, 
so  tKiat  the  people  will  not  be  under  a  fear  or  a  scarcity 
of  the  medium  of  exchange  in  circulation.  We  want  the 
act  to  give  confidence,  to  remove  the  senseless  fears  of 
timid,  thoughtless  people,  and  thus  prevent  panics,  and 
the  ruinous  depression  of  industry. 

Inconvertible  Bank  Notes. — An  explanation  of 
these  will  perhaps  give  you  a  better  value  of  the  "  con- 
vertible "  bank  notes.  An  inconvertible  bank  note  is  a 
paper  tool  of  exchange  which  acknowledges  on  its  face 
a  debt  to  be  due,  which  promises  to  pay  it,  but — mark 
this  well — no  time  is  specified  for  the  payme?it ;  and  for 
all  such  notes,  although  the  coin  is  promised,  //  cannot  be 
obtained  on  demand.  Now,  as  before  explained,  a  "  con- 
vertible "  note  is  not  payment,  but  the  payment  of  it  in 
coin  can  be  had  for  the  asking.  Thus  such  notes  are 
properly  held  to  be  a  fair  exchange,  as  they  guarantee  to 
the  seller  that  by  their  aid  he  can  obtain  coin  on  demand, 
or  other  goods  equal  in  value  to  those  he  has  sold  ; 
whereas  a  bank  note  ?iot  payable  on  demand  supplies  no 
such  guaranty,  and  its  value  is  based  upon  the  assump- 
tion that  the  government  that  issues  it  will  not  repudiate 
its  liability — will  pay  some  day  ;  but  it  is  not  certain 
that  it  ever  will  be  paid.  How  is  it,  then,  that  any  one 
is  willing  to  give  away  his  property  in  exchange  for 
such  paper  ?  Because  the  government  enacts  a  law  com- 
pelling every  creditor  who  has  debited  a  buyer  with  a 
dollar  or  a  pound  to  accept  these  notes  as  a  full  dis- 
charge of  his  debt.  They  endow  these  notes  with  the 
right  of  legal  tender.  They  owe  interest  on  the  national 
debt,  and  force  the  national  creditors  to  take  these  notes 
as  payment  of  the  interest  due.    They  purchase  supplies, 


96  MONE  Y. 

and  persuade  the  contractors  to  supply  them  with  goods 
by  means  of  the  knowledge  that  they  will  be  able  in  turn 
to  pass  on  these  notes  to  all  to  whom  they  are  indebted. 
Another  very  important  point  is,  that  bank  notes  pay- 
able on  demand  come  back  upon  the  issuers  ;  they  only 
remain  in  circulation  to  the  extent  they   are   required. 
But  with  inconvertible  notes  there  is  no  such  machinery 
for  adapting  their  number  to   the   requirements  of  the 
public  for  them  ;  once  put  out  into  circulation,  they  are 
always  out,  and  so  in  course  of  time  there  is  an  excess 
of  this  paper  money,  and  an  inevitable  fall  in  its  value 
as  compared  with  the  value  of  the  coin  which  is  acknowl- 
edged  to  be   due.     The   supply  of  them  is   too  great ; 
many  persons  have  more  of  them  than  they  know  what 
to  do  with  ;  they  become  uneasy,  and  to  get  rid  of  them, 
they  are  willing  to  part  with  them  at  a  reduced  value. 
Each  fresh  issue  adds  to  the  depreciation  and  to  the  dis- 
order it  creates  in  all  money  transactions.  The  notes  are 
worth  less  and  less,  and  thus  an  inconvertible  bank  note 
is  Hable  to  the  worst  vice  which  a  currency  can  possess 
— unsteadiness  of  value.     The  essence  of  a  currency  is, 
its  giving  a  reliable  assurance  to   a   seller  that  he  will 
be  able  to  procure  other   goods   of  the  same  value    as 
those  he  has  given  away.     The  "  convertible  "  currency 
does  this  ;  the  "  inconvertible  "  deliberately  corrupts  and 
vitiates  that  assurance,  and,  like  protection,  adds  unneces- 
sarily  and  wantonly  to  the  price  to  the  consumer,  as, 
the  value  of  the   notes  being  uncertain,  the  seller  pro- 
tects himself  by  adding  the  risk  to  the  price  of  every 
article    he    sells.     The   more    civilized   a  nation   is,  the 
greater   the    development  of   its  trade  ;  the   larger   the 
number  of  debts  to  be  settled,  and  stipulated  annuities  to 


PAPER  MONEY,  BANK  NOTES,  CHECKS.        97 

be  paid,  the  more  disastrous  is  the  violence  done  to  the 
currency,  the  more  injurious  its  consequences  to  society. 
The  essence  of  honor  and  good  faith  in  contracts,  as 
well  as  of  trustworthy  trade,  is  to  give  the  value  of  the 
thing  covenanted  for.  But  the  inconvertible  paper  note 
will  not  buy  as  much,  as  the  dealers  all  ask  a  larger  sum 
for  their  articles  ;  the  notes  will  not  obtain  so  much 
value  as  before  in  exchange  ;  and  creditors,  and  in  fact 
all  parties  with  fixed  sums  to  receive,  landlords,  annui- 
tants, all  with  fixed  incomes,  find  that  a  portion  of  their 
yearly  income  has  been  confiscated  by  the  introduction 
of  a  paper  money  not  payable  on  demand.  The  plea  is 
necessity.  What  is  the  government  to  do  ?  Why,  choose 
the  lesser  of  two  evils  ;  levy  the  heaviest  amount  of  taxes 
the  nation  can  bear,  and  borrow  upon  interest  or  annui- 
ties the  residue  upon  the  best  terms  that  are  possible. 
Face  the  position,  do  not  evade  it  by  floating  a  false 
money — a  lie,  a  fraud,  that  robs  creditors  of  the  indi- 
vidual and  the  state  ;  that  harasses  trade  and  every  ex- 
change between  man  and  man,  damaging  the  national 
credit,  and  putting  forth  an  unsound  currency  ;  that  per- 
secutes society,  and  poisons  every  sale  as  the  days  roll 
on,  affecting  every  individual,  as  all  more  or  less  buy, 
distribute,  exchange  daily. 

The  advocates  of  an  "  inconvertible  paper  currency  " 
argue  as  if  there  cannot  be  too  much  money.  Men  are 
never  taught  what  money  is,  have  yet  to  learn  the  alpha- 
bet of  currency,  that  money  is  but  a  tool,  a  medium  that 
affects  second-hand  the  exchange  of  goods.  It  is  not 
the  money  which  really  buys  ;  money  is  only  the  instru- 
ment used  in  buying.  "  It  is  the  property  with  which 
money  is  itself  bought  that  buys."     Buying  is  only  ex- 


98  MONE  y. 

changing  goods  ;  to  sell  for  money  is  only  double  barter 
in  the  place  of  single  barter.  Money  does  not  directly 
produce  a  single  particle  of  wealth,  nor  create  any 
additional  power  of  buying,  which  would  not  exist  with- 
out it.  By  simple  barter,  you  exchange  the  hat  you 
have  made  with  the  shoemaker  for  shoes  ;  by  double 
barter,  you  exchange  the  hat  for  money,  and  by  its 
agency  buy  what  you  like  and  when  you  like  to  its  value. 
But  the  power  of  purchase,  you  will  perceive,  depends 
upon  the  hats  and  shoes  ;  these  are  the  real  wealth,  the 
power,  that  enables  men  to  purchase  money.  Money 
cannot,  does  not,  increase  trade  ;  it  enables  large  trans- 
actions, all  exchange  of  property,  to  be  made  more 
easily  ;  but  without  coin  or  notes,  the  goods  made,  all 
property,  would  be  exchanged  ;  people  would  buy  and 
sell  just  the  same.  Gold  is  useful  as  currency,  so  we  pay 
miners  for  it  ;  but  we  give  real  wealth,  our  produce,  and 
manufactured  goods  for  an  article  supposed  to  be  of  the 
same  value  ;  but  it  is  not  so.  If  we  could  do  without  it, 
the  miners  and  others  employed  in  getting  it  would  be 
employed  in  producing  real  wealth  instead  of  artificial. 
You  will  also  hear  people  argue  that  it  is  a  good  thing  to 
have  a  national  debt,  forgetting  that  the  debt  implies  a 
national  indebtedness  to  pay  so  many  people  yearly  an 
amount  of  money  that  enables  them  to  obtain  so  much 
produce  or  manufactured  goods  without  doing  any  thing 
that  helps  towards  the  production  of  the  same.  There  is 
only  one  way  for  a  nation  to  be  wealthy  :  its  people  must 
work,  mentally  and  bodily — be  thrifty  and  thoughtful. 
The  national  debt,  by  giving  a  large  number  of  people 
the  right  to  live  withouf  labor — upon  the  labor,  therefore, 
of  others — is  a  national  curse  ;  as  are  all  monopolies, 
taxes,  restrictions  of  all  and  every  kind  that  stop  the 


BILLS  OF  EXCHANGE.  99 

growth  of  produce,  the  development  of  manufacture. 
The  more  goods  a  people  can  make,  the  cheaper  must 
the  same  be  to  the  consumer  ;  the  more  goods  the  money 
will  procure,  the  greater  will  be  the  demand.  Upon  this, 
and  this  only — the  power  of  the  consumer  to  purchase, 
and  his  right  thereto  being  based  upon  his  helping  in  the 
general  work — can  trade  be  healthfully  developed  and 
increased.  Men  must  learn  that  it  is  what  they  produce 
which  gives  them  the  power  to  buy  ;  and  the  Currency 
Act  must  be  so  framed  that  men  will  not  be  thwarted  and 
paralyzed  in  their  endeavors,  for  fear  of  not  getting 
enough  of  the  medium  of  exchange.  Briefly,  it  is  im- 
perative that  our  manufacturers  and  merchants  have  the 
faith  that  "  money  "  can  always  be  had  if  they  have  the 
necessary  securities  to  buy  it  with  ;  and  that  our  bankers 
should  comprehend  that  in  times  of  crisis  they  should  be 
"more  liberal  "  towards  their  regular  customers,  instead 
of,  as  heretofore,  pursuing  the  opposite  policy. 

BILLS  OF  EXCHANGE. 

A  bill  of  exchange  is  a  written  form  from  one  person 

to  another,  directing  him  to  pay  a  sum  of  money  either 

to  the  drawer  or  to  a  third  person  at  a  future  time — as 

follows  : 

London,  January  ist,  1880,  due  April  4th. 

<u  Q 

/lOO.   O.r.   od.  3         •    - 

rt   «   rt 

Three  Months  after  date,  j)ay  to  my  Order  the  sum  of  One  Hundred 

Pounds,  "S  ^  o 

a,     'S  For  value  received. 

1)  K-, 

O  I—' 

^  A.  B. 

ToC.  D., 
I,  St.  Paul's  Churchyard,  E.  C. 


lOO  MONEY. 

The  bill  may  be  drawn  for  so  many  days,  weeks,  or 
months,  either  after  the  date  of  the  bill  or  after  sight. 
This  latter  is  often  misunderstood,  and  holders  keep  the 
bills  the  thirty  or  sixty  days  before  presenting  them. 
After  sight  means  the  thirty  or  sixty  days  after  the  bill 
has  been  seen  and  accepted  by  the  banker  or  person 
upon  whom  it  is  drawn.  All  bills  to  be  legally  negotia- 
ble need  the  word  "  accepted,"  and  if  drawn  after  sight 
the  acceptor  also  writes  the  date  of  the  acceptance. 

The  person  who  draws  a  bill  is  called  the  drawer  ;  the 
person  on  whom  it  is  drawn  is  called  the  drawee.  After 
the  bill  is  accepted  the  drawee  is  called  the  acceptor. 
The  drawer  of  the  bill,  if  he  wants  his  banker  to  present 
the  same  for  him,  or  if  he  wants  to  discount  a  bill,  writes 
his  name  on  the  back  thereof,  or  endorses  it,  as  it  is 
called.  Bills  are  often  endorsed  by  a  third  party,  as 
security  for  their  payment,  if  the  acceptor  fails  to  honor 
the  bill  when  due.  The  party  who  endorses  a  bill  is 
called  the  endorser  ;  the  party  to  whom  it  is  endorsed 
is  the  endorsee.  The  person  who  pays  a  bill  is  the  payer  ; 
the  person  to  whom  it  is  paid  is  the  payee.  The  best  and 
only  legitimate  bills  of  exchange  are  those  drawn  by 
producers  or  manufacturers  upon  wholesale  dealers,  the 
second-best  are  those  drawn  by  wholesale  dealers  upon 
retail  dealers.  Bankers  should  confine  their  operations 
to  the  above  ;  there  should  be  no  encouragement  given 
to  retail  dealers  to  draw  bills  upon  consumers.  To 
discount  these  bills  is  to  encourage  extravagance  in  the 
acceptors  and,  ultimately,  ruin  to  the  drawers.  The  man 
who  gives  a  bill  to  his  butcher,  baker,  tailor,  upholsterer, 
must  be  living  beyond  his  income.  The  man  who  buys 
the  necessaries  of  life  upon  credit,  relying  on  his  divi- 


BILLS  OF  EXCHANGE.  10 1 

dends  or  rents,  is  improvident ;  the  man  who  buys  the 
necessaries  of  life,  relying  upon  his  future  earnings,  is  a 
thief,  as  he  may  die  at  any  hour,  and  has  no  moral  right 
to  incur  debts  the  liquidation  of  which  depends  not  only 
upon  his  living,  but  being  able  to  earn  his  living.    There 
are  bills  also  given  in  anticipation  of  salaries  or  rents  ;  if 
these  are  against    value,    they  should  be    discouraged  ; 
persons  out  of  trade  have  no  business  with  bills.  Accom- 
modation  bills  ought  always  to  be  refused  by  a  banker  ; 
they  are  a  fraud  ;    "  lie  "  is  upon  their  face,  for   value 
received  written  thereon  is  an  untruth.  A  B  has  accepted 
to  oblige  C  D,  but  no  real  value  is  represented  ;  the  bill 
is  not  what  it  professes  to  be — an  acknowledgment  of  a 
debt — and  the  bill  given  that  C  D   may  transfer  a  debt 
due  by  A  B  to  his  banker.  Bills  of  exchange  are  invalua- 
ble  in   commerce  ;    the   knowledge   of   large   payments 
in  gold    at  fixed  periods,  monthly  settlements,   bills  to 
meet  on  the  4th,  etc.,  would  be  more  than  the  nerves  of 
ordinary  men  could  bear,  were  it  not  lessened  by  the  fact 
that  they  hold  so  much  paper  in  their  bill  boxes  that 
their  bankers  will  discount  for  them  if  needed.     There- 
fore, all    commercial    men  should   strive    to  keep  their 
paper  above  suspicion.     Bills  are  the  best  and  cheapest 
means  of  transferring  money  from  one  place  to  another. 
Bills  of  exchange  are  a  legitimate  and  useful  means  of 
borrowing,  and  a  handy  means  of  security  for  bankers  to 
lend  upon  ;  but  it  is  most  important  that  they  be  genu- 
ine, and  be  what  in  reality  they  are,  a  system  of  hypothe- 
cation— viz.  :  A  (the  trader)  having  ;^i, 000  owing  to  him 
by  B,  and  B  not  being  able  to  pay  it  at  the  time,  and  A 
wanting  the  money  at  once,  draws  a  bill  upon  B,  and  the 
bankers  believing  in  the  genuineness  of  the  bill,  that  it  is 


t02  MONEY. 

a  debt  for  goods  sold  and  delivered,  discount  the  paper, 
and  the  right  of  receiving  the  debt  of  B  is  transferred  to 
them  by  A,  it  being  understood  A  has  to  pay  if  B  fails  to. 
Another  ingenious  expedient  is  that  of  A  having  con- 
signed certain  bales  of  merchandise  to  B,  draws  upon  him, 
at  so  many  days  after  sight,  and  by  depositing  with  a 
banker  the  bills  of  lading,  policy  of  insurance,  and  bills  of 
exchange,  the  banker  advances  him  the  money,  and  his 
agents  collect  the  debt  or  receive  payment  of  the  bills 
drawn  on  the  consignee.  This  is  a  very  useful  arrange- 
ment, and  if  bankers  would  only  exercise  the  proper 
caution,  have  all  invoices  signed  by  the  principals,  and 
only  undertake  to  collect  the  debt — that  is,  to  hold  the 
bills  of  lading  and  other  documents  until  the  bills  are 
paid  ;  or,  if  they  advance  the  money  to  consignor,  keep 
rigidly  to  "  two  thirds  "  of  the  value,  protecting  them- 
selves, as  at  present,  with  letters  empowering  them  to  sell 
before  the  bills  mature  incase  of  insolvency  of  consignee 
— to  act,  in  fact,  as  if  themselves  the  direct  consignors, 
but  with  power  to  sue  the  real  consignors  for  any 
denciency,  or  to  appropriate  any  excess, — the  system 
would  be  a  national  benefit.  But  their  laxity  in  making 
too  large  advances  has  been  the  means  of  introducing 
into  this  "  shipping "  trade  the  reckless,  unscrupulous 
adventurers  we  have  heard  so  much  of  the  last  ten  years, 
— men  who  are  not  in  a  position  to  pay  if  their  custom- 
ers fail  to  do  so,  or  to  bear  the  losses  consequent  upon  a 
forced  realization  of  the  merchandise,  too  often  recklessly 
consigned  because  of  the  facilities  of  borrowing  upon  the 
bills  of  lading,  etc.  Then  follow  commercial  disasters 
and  social  shipwreck.  So,  instead  of  recommending  an 
extension  of  credit,  or  an  increase  of  fictitious  money,  I 


BILLS  OF  EXCHANGE.  IO3 

advocate  more  strict  adherence  to  legitimate,  sound 
trading  and  banking,  and  the  discouragement  of  all  the 
ingenious  shifts  and  contrivances  by  which  speculators 
and  needy  men  try,  by  means  of  the  shadow^  paper, 
to  take  a  position  or  do  the  trade  justified  only  by  the 
presence  of  the  substance,  gold. 

Bills  fix  the  period  for  the  payment  of  debts,  and  in 
case  of  litigation  they  afford  an  easy  proof  of  the  debt. 
Many  otherwise  good  business  men  will  have  no  scruple 
in  putting  off  tradesmen  to  whom  they  owe  money,  and 
the  creditors  dare  not  be  too  pressing,  for  fear  of  giving 
offence  ;  hence  the  time  of  payment  is  uncertain.  This 
is'one  of  the  greatest  evils  not  only  in  the  retail  but  the 
wholesale  trade.  With  the  consuming  class,  the  time 
may  not  be  ripe  for  insisting  upon  fixed da.ys  of  payment ; 
but  in  the  wholesale  trade,  a  bill  or  check  upon  a  fixed 
settling  day  every  month,  or  the  month  when  an  account 
is  due,  should  be  strictly  enforced,  or  the  account  at  once 
closed.  But  you  will  perceive  the  value  of  bills  ;  a  trader 
will  meet  his  bills  who  has  no  hesitancy  and  thinks  it  not 
derogatory  to  his  credit  to  keep  putting  you  off  with  one 
excuse  or  the  other  upon  an  open  account.  It  is  sur- 
prising how  even  professedly  religious  men  fail  to  see  the 
dishonesty  of  thus  depriving  their  creditors  of  the  use  of 
their  money.  Traders  in  good  position  will  tell  you  they 
have  been  buying  houses  or  shares  ;  therefore  you  must 
wait.  The  inconvenience  to  you  is  never  thought  of,  or 
apologized  for  ;  in  fact,  it  is  the  most  painful  experience 
to  a  trader  with  an  active  conscientiousness  ;  this  laxity 
of  morals,  this  ignoring  the  rights  of  others,  being  done 
by  men  for  gain,  not  from  necessity.  We  need  all  men 
to  perceive  clearly  that  any  man  who  fails  to   pay  his 


104  MONEY. 

debt  on  the  day  when  it  is  due,  whether  accepted  for  or 
not,  is,  unless  he  pays  interest — which  is  rarely,  if  ever, 
done,  and  is  not  allowed  by  law  on  open  accounts, — de- 
riving an  advantage  at  the  expense  of  his  creditor — an 
advantage  which,  in  my  opinion,  no  really  honest  man 
should  take.  If  a  man  dishonors  his  acceptance,  his 
character  is  stamped  at  once  in' the  commercial  world  as 
being  either  very  poor,  very  negligent,  or  very  unprinci- 
pled, and  at  no  future  time  will  he  be  able  so  easily  to 
raise  money  upon  the  credit  of  his  name.  I  see  no  rea- 
son why  the  same  opinion  should  not  be  generally  enter- 
tained by  those  who  fail  to  keep  their  word  in  paying 
their  debts  at  the  time  agreed  upon  ;  and  if  it  was 
generally  understood  that  the  same  stigma  would  attach 
to  the  failing  to  keep  the  verbal  promise  as  the  written 
bond,  the  means  would  have  been  taken  to  destroy  the 
worst  feature  of  our  credit  system. 

We  have  to  overcome  in  the  public  mind  a  feeling  of 
prejudice  respecting  bills  of  exchange.  Many  experi- 
enced traders  refuse  to  accept,  others  boast  they  never 
accepted,  a  bill  ;  but  if  you  regard  your  word  as  your 
bond,  what  difference  does  it  make  to  you  if,  not  being 
able  to  pay  my  debt  when  it  is  due  for  discount,  you  give 
me  a  bill  instead  ?  By  means  of  bills  a  trader  can  carry 
on  a  larger  business  with  the  same  capital.  For  instance, 
you  owe  me  ;^ioo,  but  cannot  pay  ;  if  you  refuse  to 
accept  a  bill,  the  loss  of  this  ;j^ioo  will  seriously  interfere 
with  my  payments,  damage  my  credit,  prevent  my  buy- 
ing stock,  and  thereby  check  my  trade  ;  but  if  you 
accept  the  bill  for  the  amount  you  owe  me,  I  send  it  to 
my  banker  ;  he,  having  faith  in  me,  places  the  amount 
to  my  credit,  and  the  bill  is  to  me  as  useful  as  the  cash 


BILLS  OF  EXCHANGE.  I05 

would  have  been — in  fact,  you  give  me  a  lawful  recog- 
nized medium  by  which  others  will  supply  me  with  the 
gold  that  temporarily  you  cannot  pay  me.  Some  trades- 
men pay  their  debts  with  customers'  bills — a  habit  that 
should  not  be  encouraged.  All  bills  should  go  to 
bankers  ;  it  is  their  business  to  discount  the  same.  If 
you  owe  me  a  debt,  you  should  pay  me  in  money,  or  give 
me  your  acceptance  for  the  amount.  In  business  bills 
are  invaluable  to  tradesmen,  and  they  set  in  motion  what 
would  otherwise  be  large  sums  of  locked-up  capital.  They 
also  enable  men  to  go  into  business  that  otherwise  would 
be  debarred  therefrom  ;  as  to  give  credit  without  drawing 
bills  would  require  much  larger  capital  than  the  majority 
of  traders  possess.  To  give  no  credit  would  restrict  one's 
business  ;  by  means  of  bills  credit  can  be  given,  and  the 
business  extended,  without  any  addition  to  the  capital 
being  required. 

Bills  are  an  easy  way  of  giving  a  guaranty.  A  wants 
to  borrow  ^100  of  B,  which  the  latter  is  in  a  position  to 
lend,  but  not  upon  A's  security  alone  ;  A,  therefore,  gets  a 
friend  either  to  join  him  in  signing  a  promissory  note  for 
the  sum  needed,  or  in  endorsing  a  bill  of  exchange.  By 
this  means  B  can  assist  A,  and  money  might  be  often 
lent  safely  and  advantageously,  as  B,  in  case  of  need, 
could  re-discount  the  bill  with  his  bankers.  But  bear 
this  in  mind,  there  must  be  bona-fide  consideration  given 
for  the  bill  ;  as  pure  accommodation  bills,  I  care  not  for 
what  purpose  needed,  are  dishonest,  fictitious,  and  indi- 
cate the  folly,  as  they  invariably  effect  the  ruin,  of  all  the 
parties  concerned. 

Bankers  by  means  of  bills  unconsciously  transfer  capi- 
tal from  the  trade  not  wanting  capital  to  the  trade  that 


I06  MONEY. 

does.     Every  branch  of  trade  is  liable   to  fluctuations, 
from   an  alteration  in  the  proportions  between  the  de- 
mand and  the  supply,  and  hence  capital  is  continually 
undergoing   a   transfer    from    the   production    of   those 
articles  for  which  there  is  a  less  demand  to  the  produc- 
tion of  those  articles  for  which  there  is  a  greater  demand. 
So  we  hear  from  political  economists  of  an  average  rate 
of  profit  in  all  trades,  because  by  a  natural  law  capital 
flows  from  or  ceases  to  be  supplied  to  those  branches  of 
trade  where  it  is  not  remunerative,  and  finds  its  way  to 
those  other  branches  where  it  is  wanted.     Banking  helps 
this   natural   law.     A  manufacturer  does   not  leave  his 
employment,  or  transfer  his  capital,  but  the  manufacturer 
in  the  declining  trade  reduces  his  capital,  while  the  manu- 
facturer in  the  prosperous  trade  will  augment  his  capital, 
and  the  transfer  of  capital  from  one  trade  to  the  other  is 
effected  chiefly  by  bills  of  exchange.     For  example,  the 
manufacturer  who  is  selling  a  less  quantity  of  commodi- 
ties will  have  fewer  bills  to  discount  with  his  banker,  but 
the   other  manufacturer  who   is   buying   and    selling   a 
greater  quantity  of  commodities  will  have  more  bills  for 
discount.     You  will  perceive  that  the  banker  who  uses 
the  bulk   of  his   capital  in  the  discount   of  commercial 
bills  thus  easily  transfers  from  one  branch  of  commerce 
to  another  money  or  capital  in  exact  proportion  to  the 
circumstances  of  the  respective  parties. 

BANK  SHARES. 

Banking  is  essential  to  our  prosperity  ;  it  is  therefore 
imperative  upon  us,  as  a  "  practical  people,"  to  make  the 
investing  in  "  bank  shares  "  less  risky  than  it  is.     The 


BANK  SHARES.  I07 

large  profits  to  the  original  shareholders  of  the  leading 
joint-stock  banks  may  justify  incurring  the  liability  as  a 
speculative  investment  ;  but  in  considering  this  question 
we  have  to   remember  that   the   market  price   of  these 
banks  at  the  present  time  only  gives  4|-  to  6  per  cent,  to 
the  present  investors  ;  and  no  sensible  man  of  any  re- 
sponsibility will  for  such  remuneration  put  such  a  liabil- 
ity on   his  shoulders — a  liability   that  may  utterly  ruin 
him   at  any  moment.     Therefore,  I  would  substitute  a 
"  positive  "  for  an  unlimited  liability.     In  the  new  edi- 
tion of  "Business,"   1879,  before  the  Chancellor  of  the 
Exchequer  brought  forward  his  plan  of  multiple  share 
value,  I  had  advocated  that  all  the  shares  be  fully  paid 
up,  and  that  each  shareholder  be  liable  for  a  similar  fixed 
sum  ;  and  instead  of  "reserve  liability,"  as  reserve  might 
imply  any  sum,   I  wrote  to  the  Chancellor  of  the  Ex- 
chequer that  my  book  had  been  in  the  printer's  hands 
two   months,   and  that  there  I  had  advocated  "  double 
liability  "  ;  as  the  public,  knowing  that  "  limited  "  meant 
liability  to  the  value  of  the  shares,  "  double  "  would  im- 
ply double  the  value  of  the  shares,  and  that  would  indi- 
cate to  the   shareholder  his  responsibility,   and  to   the 
public  its  security.     In  1879  the  law  was  amended  ;  some 
of  the  banks  became  "  limited  "  ;  and  it  is  satisfactory 
to  find,  end  of  the  year   1880,  that  Mr.  Huth,  chairman 
at  the  meeting  of  the  London  and  Westminister  Bank 
for  the  half-year  ending  December  31,  1880,  stated  that 
the   deposits  were  ;^  1,500,000   more   than   at   June  30, 
1880,    that    the   half-year's    dividend    was    9    per   cent., 
against  7^  per  cent.,  same  half-year  of  1879  ;  that  new 
accounts  had  been  opened,  and  the  list  of  shareholders 
been  much  strengthened  by  the  entrance  into  it  of  per- 


I08  MONEY. 

sons  of  wealth  and  standing,  who  had  kept  away  so  long 
as  the  liability  of  shareholders  was  unlimited.  The  ob- 
ject of  legislation  should  be  to  encourage  the  better  class 
of  investors — intelligent  men  who  can  understand  a  bal- 
ance-sheet, and  competent  to  ask  questions  at  the  half- 
yearly  meetings  ;  prudent  men  willing  to  incur  a  fixed 
amount  of  responsibility,  but  refusing  to  saddle  them- 
selves with  a  liability  that  means  "  ruin  "  if  an  incompe- 
tent or  unprincipled  man  be  manager  of  the  bank.  The 
only  argument  in  extenuation  of  "  unlimited  liability " 
was  to  guarantee  the  ;;t;/^-holders,  but  if  we  had  only 
"national  notes"  issued  by  the  government  against 
security,  this  objection  would  be  removed. 

The  liability  of  directors  and  manager  should  be  "  un- 
limited." They  have  great  power,  and  it  is  not  in  human 
nature  to  guard  borrowed  money  with  the  same  vigilance 
as  money  obtained  by  one's  own  incessant,  self-denying, 
hard  work.  The  only  plan  is  to  let  those  who  have  the 
power  take  the  responsibility  for  all  they  possess  ;  so 
that  they  confine  themselves  to  legitimate  banking,  and 
be  not  tempted  to  things  best  left  alone.  Their  position 
is  this,  for  a  margin  of  one  per  cent,  to  two  per  cent.,  or 
for  large  sums  half  per  cent,  to  one  per  cent.,  to  find  for 
their  thousands  of  customers  the  prudence,  caution,  and 
common-sense  which  in  many  cases  the  customers  ought 
to  find,  and  it  would  be  better  for  all  parties  that  they 
found  for  themselves.  Men  must  act  for  themselves  more, 
and  cease  to  regard  joint-stock  banks  as  a  kind  of  cen- 
tral financial  providence. 

The  joint  stock-banks  of  this  country  have  been  a 
most  remarkable  success.  For  their  future  jjrosperity,  to 
retain  the  confidence  of  the  "  moneyed  public,"  it  should 


BANK   SHARES.  IO9 

be  understood  that  a  banker's  business  is  to  use  the 
"capital  of  others."  It  is  a  business  in  which  the  capi- 
tal of  the  proprietors  is  used,  not  to  work  the  business, 
but  to  guarantee  the  business.  It  is  only  wanted  as  a 
"moral  influence."  There  was  a  time  for  all  things. 
Whilst  the  idea  was  a  new  one,  joint-stock  banking 
needed  from  the  public,  confidence,  without  which  banks 
cannot  prosper ;  and  the  unlimited  liability  of  each 
shareholder  was  then  necessary  ;  but  unlimited  liability 
has  done  its  work,  and  after  the  terrible  catastrophe  of 
the  City  of  Glasgow  Bank,  no  sensible  man  of  property 
would  continue  to  hold  any  shares  in  an  "unlimited 
bank."  Think  for  a  moment  what  profit  can  compen- 
sate for  the  possibility  of  ruin  at  any  moment.  Who 
would  incur  the  risk  ?  "  Only  men  of  no  property,"  an 
inferior  class  of  shareholders  ;  whereas  in  banking  com- 
panies we  need  the  very  best  class  that  can  be  had.  So, 
as  the  banks  will  in  a  very  short  time  be  "  unlimited  " 
only  in  name,  it  is  time  the  Liability  Act  in  reference  to 
banking  and  other  companies  be  amended.  But  as 
regards  the  issue  of  notes,  until  an  alteration  be  made  in 
the  method  of  issue,  there  must  be  no  limitation  of  lia- 
bility here,  or  you  damage  the  value  of  notes  as  a  medium 
of  exchange.  Currency  must  be  kept  above  all  suspicion  ; 
therefore  the  holder  of  a  note  of  a  bank  that  fails  should 
come  in  with  the  other  creditors  as  regards  the  general 
assets,  but  have  the  right  of  a  secured  creditor  against 
the  shareholders  for  the  residue.  The  reason,  you  will 
perceive,  is  obvious.  A  trader  is  almost  compelled  to 
take  a  note  if  offered.  Notes  are  valueless  unless  they 
circulate  ;  to  ensure  their  circulation  needs  confidence  ; 
to  give  this  there  must  be    security.     But  a  man  who 


no  MONEY. 

takes  and  buys  shares,  or  has  a  current  or  deposit  ac- 
count, acts  upon  his  own  free-will,  for  certain  advan- 
tages to  himself,  and  must  take  the  responsibility  with  the 
benefits. 

M.  Thiers  has  well  defined  responsibility  in  sketching 
the  qualities  necessary  for  success  in  war,  and  brings 
vividly  before  his  readers  the  tremendous  issues  that 
hang,  moment  by  moment,  upon  the  genius,  the  strength 
of  will,  the  promptness,  and  the  presence  of  mind  needed 
in  a  general  on  a  day  of  battle.  Bankers  and  bank 
managers  need  all  the  qualities  except  genius  for  their 
positions,  and  have  daily  need  of  all  the  other  qualities 
necessary  to  a  great  general.  If  war  has  her  reverses  and 
defeats,  so  has  peace  ;  and  there  are  none  equal  to  the 
carnage  caused  by  incompetent  bank  managers.  Their 
position  is  one  of  unlimited  responsibility.  They  have 
the  power  to  do  immense  benefit,  and  to  do  it,  if  they 
have  the  requisite  capacity,  by  the  rules  of  good  banking, 
sound  finance  ;  and  they  also  have  the  power  to  bring 
forth  the  horrors  that  follow  false  and  guilty  finance, 
unsound  banking,  as  with  the  City  of  Glasgow  Bank, 
the  West  of  England  Bank,  etc.,  and  thereby  prostrate 
thousands  of  families  in  ruinous,  hopeless  misery 
worse  than  death.  Shareholders  must  be  more  vigilant. 
The  manager  of  one  of  the  large  banks  has  the  control 
of  millions,  and  there  is  more  probability  of  mistakes  being 
made,  that,  if  not  rectified  or  stopped,  will  be  ruinous, 
than  there  is  of  a  manager  committing  a  fraud.  But  er- 
rors of  judgment,  the  mistakes  of  a  sanguine  manager,  are 
far  more  to  be  dreaded  than  the  theft  of  a  dishonest 
manager.  Commerce  needs  energy  and  enterprise  ;  but 
banking  is  simple,  steady-going,  and  cautious.     "  There 


BANKING.  1 1 1 

is  no  more  unsafe  government  for  a  bank,"  says  Mr. 
Bagehot,  "  than  that  of  an  eager  and  active  manager,  sub- 
ject only  to  the  supervision  of  a  numerous  board  of  di- 
rectors, even  though  that  board  be  excellent ;  for  the 
manager  may  easily  glide  into  dangerous  and  insecure 
transactions,  nor  can  the  board  effectually  check  him." 
Banking  is  a  very  peculiar  business,  and  it  depends  so 
much  upon  credit,  the  confidence  of  its  depositors,  etc., 
that  the  least  blast  of  suspicion  is  sufficient  to  sweep 
away,  as  it  were,  the  harvest  of  a  whole  year.  Great 
vigilance  is  needed,  and  there  is  great  anxiety.  They 
have  very  large  sums  to  employ,  yet  are  expected  to  be 
ready  at  all  times  to  pay  ;  so  are  compelled  to  restrict 
their  advances  to  such  securities  as  are  available  in  case 
of  need — "  negotiable  "  securities,  as  they  are  termed.  It 
is  a  terrible  responsibility  to  feel  that,  whether  weakly  or 
wickedly,  you  have  led  the  shareholders  and  depositors 
who  have  trusted  to  you  along  the  road  to  ruin. 
The  law  should  be  clearly  defined  as  to  the  personal 
responsibility  of  managers  and  directors  of  all  joint-stock 
companies.  Their  position  is  one  of  great  trust ;  their 
duties  should  be  well  remunerated  ;  but  any  deception, 
such  as  a  false  balance-sheet,  should  be  punished 
criminally. 

BANKING. 

We  have  but  little  information  as  to  what  kind  of 
banks  existed  in  the  earlier  ages,  or  on  what  system  they 
conducted  their  business,  as  most  of  the  nations  of  an- 
tiquity subsisted  chiefly  on  agriculture.  They  probably 
had  little  occasion  for  banks,  for  it  is  only  in  commercial 
countries  that  these  institutions  have  attained  to  any  high 


112  MONEY. 

degree  of  prosperity.  And  as  even  the  commercial  nations 
of  antiquity  were  unacquainted  with  joint-stock  companies 
or  commercial  corporations,  and  had  not  discovered  the 
use  of  paper  money  or  bills  of  exchange,  the  business  of 
a  banker  even  among  them  must  have  been  somewhat 
different  from  that  of  a  banker  of  the  present  day. 
There  was  no  necessity,  in  fact,  for  these  instruments  to 
supplement  the  work  in  conjunction  with  "  money,"  or 
the  medium  of  exchange  between  buyer  and  seller. 
Like  every  thing  else,  money  has  progressed  from  infancy 
to  age.  We  are  so  familiar  with  its  operations  that  we 
forget  to  pause  and  consider  what  a  useful  thing  money 
really  is.  Imagine,  at  the  present  day,  that  there  was  no 
such  thing  as  money  ;  how  could  it  be  possible  to  get  any 
thing  we  might  want  ?  The  'shoemaker,  for  instance, 
wanting  bread,  meat,  and  beer  for  his  family,  must  go  to 
the  baker  and  exchange  his  shoes  for  as  much  bread  as 
they  were  worth,  and  would  be  compelled  to  go  to  the 
butcher  for  meat,  the  brewer  for  beer  ;  and  if  this  species 
of  bartering,  which  money  saves  us  from,  were  general, 
one  can  easily  perceive  what  a  frightful  state  of  confu- 
sion and  misery  we  should  be  in. 

The  merchants  of  early  times  employed  as  money 
gold  and  silver  bullion,  and  received  it  and  paid  it  away 
by  weight.  We  read  of  Abraham  weighing  unto  Ephron 
400  shekels  of  silver,  current  money  with  the  merchant, 
which  implies  that  the  money  current  with  the  merchant 
was  different  from  that  in  ordinary  use.  After  bullion 
was  superseded  by  coin,  and  each  nation  had  a  coin 
of  its  own,  the  merchants  would  necessarily  in  the 
course  of  their  business  receive  coins  belonging  to 
different  nations  ;  and  hence  ^would  be  applied  to  by 


BANKING.  1 1 3 

Strangers  who  wished  to  exchange  their  own  money 
for  the  money  of  the  country  in  which  they  so- 
journed. We  read  in  the  New  Testament  of  money- 
changers who  had  tables  in  the  Temple  of  Jerusalem.  It 
is  probable  they  attended  for  the  purpose  of  giving  Jew- 
ish money  in  exchange  for  those  various  coins  which  per- 
sons coming  from  the  neighboring  countries  might  have 
brought  with  them.  Whether  the  business  of  money-chan- 
ging was  carried  on  as  a  separate  employment,  or  united 
with  the  general  business  of  the  merchant,  we  are  not 
informed,  but  it  is  stated  that  the  exchangers  allowed  in- 
terest for  money  lodged  in  their  hands.  "  Thou  wicked 
and  slothful  servant,  thou  oughtest  to  have  put  my  money 
to  the  exchangers,  and  then  at  my  coming  I  should  have 
received  my  own  with  usury."  From  the  circumstance 
of  their  allowing  interest  on  money  we  may  infer  that 
they  also  lent  money  on  interest,  otherwise  they  would 
have  had  no  use  for  the  money  they  borrowed.  "  This 
scanty  information,"  says  Mr.  Gilbart  in  his  admirable 
book,  *'  The  Logic  of  Banking,"  "  forms  the  whole  of  our 
knowledge  respecting  the  mode  of  banking  practised  by 
the  ancient  Babylonian,  Egyptian,  and  Jewish  nations." 
The  Bank  of  Amsterdam  was  founded  in  the  year  1609. 
It  was  occasioned  by  the  vast  quantity  of  worn  and 
clipped  coin  then  in  circulation,  in  consequence  of  which 
the  value  of  the  currency  was  reduced  above  nine  per 
cent,  below  that  of  good  money  fresh  from  the  mint. 
The  banks  received  these  deficient  coins  at  nearly  their 
intrinsic  value,  and  made  all  its  issues  in  coin  of  the 
standard  weight  and  fineness.  At  the  same  time  a  law 
was  made  that  all  foreign  bills  of  exchange  should  be 
paid  in  bank  money.     This  law  raised  the  value  of  bills 


1 14  MONE  V. 

on  Holland  in  foreign  countries,  and  compelled  every 
merchant  to  keep  an  account  at  the  bank  in  order  that  he 
might  at  all  times  have  legal  money  to  pay  his  foreign 
bills.  The  premium  (called  the  agio)  on  bank  money 
was  regulated  by  the  market-price  of  gold,  and  was  sub- 
ject to  considerable  fluctuations.  To  prevent  the  gambling 
to  which  these  fluctuations  gave  rise,  the  bank  at  length 
determined  to  sell  bank  money  for  currency  at  five  per 
cent,  agio,  and  to  buy  it  again  at  four  per  cent.  From 
this  and  other  sources  of  profit  the  bank  is  supposed 
to  have  gained  a  considerable  revenue.  It  was  the  en- 
tire property  of  the  city  of  Amsterdam,  and  was  placed 
under  the  direction  of  four  burgomasters,  who  were 
changed  every  year. 

The  Bank  of  Amsterdam  was  the  model  on  which  were 
formed  most  of  the  European  banks  now  in  existence  ; 
but  they  have  varied  very  considerably  from  each  other, 
according  to  the  circumstances  of  the  respective  coun- 
tries in  which  they  have  been  established.  The  Bank  of 
England  was  established  by  an  act  of  Parliament  enti- 
tled :  "An  act  for  granting  to  their  Majesties  several 
duties  upon  tonnage  of  ships  and  vessels,  and  upon  beer, 
ale,  and  other  liquors  ;  for  securing  certain  recompenses 
and  advantages  in  the  said  act  mentioned  to  such  per- 
sons as  shall  voluntarily  advance  the  sum  of  fifteen  hun- 
dred thousand  pounds  towards  carrying  on  the  war  with 
France." 

After  a  variety  of  enactments  relative  to  the  "  duties 
upon  tonnage  of  ships  and  vessels,  and  upon  beer,  ale, 
and  other  liquors,"  the  act  authorizes  the  raising  of 
;;^i,2oo,ooo  by  voluntary  subscriptions  ;  the  subscribers 
to  be  formed  into  a  corporation,  and  be  styled  "  The 


BANKING.  I  I  5 

Governor  and  Company  of  the  Bank  of  England."  The 
suni  of  ;^30o,ooo  was  also  to  be  raised  by  subscription, 
and  the  contributors  to  receive  instead  annuities  for  one, 
two,  and  three  lives.  Towards  the  ;^i, 200,000  no  one 
person  was  to  subscribe  more  than  ^10,000  before  the 
ist  day  of  July  next  ensuing,  nor  at  any  time  more  than 
;^20,ooo.  The  corporation  were  to  lend  their  whole  cap- 
ital to  government,  for  which  they  were  to  receive  inter- 
est at  the  rate  of  eight  per  cent,  per  annum,  and  ^4,000 
per  annum  for  management,  being  ^^100,000  per  annum 
in  the  whole.  They  were  not  allowed  to  borrow  or  owe 
more  than  the  amount  of  their  capital,  and  if  they  did  so, 
the  individual  members  became  liable  to  the  creditors  in 
proportion  to  the  amount  of  their  stock.  They  were  not 
to  trade  in  any  "goods,  ware,  or  merchandise  whatsoever," 
but  they  were  allowed  to  deal  in  bills  of  exchange,  gold 
or  silver  bullion,  and  to  sell  any  goods,  ware,  or  mer- 
chandise upon  which  tlicy  had  advanced  money,  and 
which  had  not  been  redeemed  within  three  months  after 
the  time  agreed  upon.  The  whole  subscription  having 
been  filled  in  ten  days,  a  charter  was  issued  on  the  27th 
day  of  July,  1694.  This  was  the  commencement  of  the 
world-famed  Bank  of  England,  than  which  there  can  be 
found  no  better  evidence  of  the  value  of  credit  :  a  Bank 
of  England  note,  a  mere  bit  of  paper,  yet  received  by 
every  one,  everywhere,  in  payment  of  debt,  as  if  it  were 
gold  itself,  instead  of  a  promise  of  a  banking  corporation 
to  redeem  it  in  gold  when  presented  for  payment  !  In 
the  year  1S26  branches  of  the  Bank  of  England  were 
established  in  the  provinces.  The  country  bankers  were 
strongly  opposed  to  these  branches,  and  held  public 
meetings  at  which  resolutions  were  passed  in  condemna- 


Il6  MONEY. 

tion  of  them,  and  in  the  year  1828  presented  a  memorial 
to  the  government  upon  the  subject. 

In  1826,  joint-stock  banks,  with  unlimited  liability  of 
shareholders,  were  permitted  to  be  established  at  a 
greater  distance  than  sixty-five  miles  from  London  ;  the 
object  of  the  Act  of  1826  being  to  promote  the  formation 
of  those  joint-stock  banks,  and  thereby  replace  to  a  large 
extent  the  private  country  banks,  of  which  so  many  had 
failed  during  the  memorable  panic  of  the  wititer  of 
1825-6. 

In  1833,  by  the  3  and  4  Wm.  IV.  c.  98,  it  was  declared 
to  be  the  law  that  joint-stock  banks  might  be  established 
in  London.  Under  this  statute  the  London  and  West- 
minster Bank  was  formed.  And  it  should  not  be  forgot- 
ten the  great  difficulties  this  bank  had  to  overcome. 
The  statute  did  not  give  them  the  power  of  suing  and 
being  sued  by  their  "public  officers,"  and  they  had  to 
introduce  into  Parliament  a  bill  to  give  them  this  privi- 
lege. The  directors  might  well  say  in  their  first  report, 
delivered  March  4,  1835,  "that  they  have  had  to  en- 
counter difficulties  of  no  ordinary  kind,  caused  by  an 
opposition,  in  some  degree  natural,  but  carried  to  an 
unfair  extent,  by  existing  establishments,  and  likewise 
by  the  unaccountable  course  adopted  by  government, 
who  seem  to  have  been  deterred  by  the  same  interested 
parties  from  giving  effect  to  their  own  law."  The  oppo- 
sition of  the  private  bankers  was  manifested  at  an  early 
period  by  their  refusal  to  permit  any  clerk  to  attend  at 
the  clearing-house  on  behalf  of  this  bank.  The  clear- 
ing-house has  been  in  existence  for  upwards  of  sixty 
years,  and,  although  founded  in  the  first  instance  for  the 
accommodation   of  such   London  bankers  as  chose  to 


BANKING.  117 

avail  themselves  of  it,  yet  it  has  become  entwined  with 
the  mode  of  settling  accounts  in  several  branches  of 
business,  and  is,  for  all  practical  purposes,  a  public 
institution.  The  opposition  of  the  Bank  of  England 
began  by  their  refusal  to  grant  to  this  company  the 
common  convenience  of  a  drawing  account — a  conven- 
ience granted,  as  a  matter  of  course,  to  every  respectable 
firm  who  may  choose  to  apply  for  it.  But  this  hostility, 
as  well  as  that  of  the  government,  was  more  strongly 
shown  by  their  opposition  to  the  bill  introduced  into 
Parliament  for  facility  of  suit.  This,  it  was  conceived, 
was  a  course  that  no  party  could  adopt  after  the  explicit 
manner  in  which  the  law  had  been  laid  down  in  the  pre- 
ceding session  of  Parliament.  However,  the  bill  was 
opposed  with  a  zeal  and  tenacity  rather  out  of  the  usual 
course  of  parliamentary  proceedings  ;  yet  it  was  carried 
by  large  majorities  through  each  successive  stage — viz., 
on  the  second  reading,  by  a  majority  of  loS  ;  in  com- 
mittee, after  the  fullest  and  ablest  argument  by  counsel 
on  both  sides,  by  a  still  greater  proportionable  majority  ; 
and  again,  on  the  third  reading,  by  a  majority  of  61. 
Notwithstanding  these  majorities  in  the  House  of  Com- 
mons, the  opposition  was  continued  in  the  House  of 
Lords.  In  the  beginning  of  1837  the  Bank  of  England 
got  the  Master  of  the  Rolls  to  issue  an  injunction 
restricting  the  London  and  Westminster  Bank  from 
accepting  bills  drawn  at  less  than  six  months  after  date, 
upon  the  ground  that  this  would  be  an  invasion  of  the 
charter  of  the  Bank  of  England.  ("  Logic  of  Banking," 
by  Gilbart.)  Thus  we  see  in  every  age  the  danger  of 
monopolies.  With  banks,  as  with  trade,  government 
interference  is  a  great  evil  ;  we  want  to  be  let  alone,  and 


Il8  MONEY. 

should  all  unite  as  one  man  in  opposing  any  further 
encroachment  by  the  government  on  the  freedom  of 
banking,  commerce,  labor ;  and  should  also  have  an 
organized  action  to  remove  gradually  all  existing  restric- 
tions upon  companies  or  individuals,  and  for  the  aboli- 
tion of  all  monopolies. 

The  Bank  of  England  is  a  grand  and  imposing  place ; 
its  importance  and  its  power  are  manifest,  its  exterior  is 
like  a  fortress  in  the  city  of  gold,  only,  unlike  military 
fortresses,  herein  any  one  may  enter  who  has  the  courage 
to  do  so,  unchallenged.  The  chief  entrance  to  the  Bank 
of  England  is  in  Threadneedle  Street.  On  either  hand 
are  the  halls  of  the  banking  department  of  the  establish- 
ment, and  in  front  is  the  issue  department.  The  portion 
of  the  banking  department  to  the  right,  forming  the 
entire  eastern  end  of  the  bank,  is  devoted  to  the  manage- 
ment of  the  national  debt,  where  all  transfers  of  govern- 
ment stock  are  registered,  and  where  periodical  payment 
is  made  of  the  dividends.  At  each  quarterly  term  these 
rooms  are  crowded  by  people  of  nearly  all  ranks  and 
classes,  many  of  them  from  the  country,  who  come  to 
get  payment  of  their  dividends,  which  vary  in  amount 
from  several  thousands  sterling  down  to  a  single  pound, 
or  even  less.  The  amount  of  work  which  this  entails 
upon  the  bank  is  greater  than  might  be  thought.  Apart 
from  the  work  of  paying  the  dividends,  the  transfers  of 
stock  which  the  bank  has  to  register  amount  in  the 
aggregate  to  the  enormous  sum  of  about  two  hundred 
and  thirty  millions  sterling  a  year. 

The  following  description  of  the  Bank  of  England  is 
from  "  Economy  of  Capital,"  by  R.  H.  Patterson  : 

"  To  the  left  of  the  chief  entrance  we  find  the  drawing 


BANKING.  119 

offices — a  long  range  of  counters, — one  of  which  is  de- 
voted to  public  or  government  business,  and  the  other, 
and  larger,  to  banks  and  private  customers.  In  the 
former  of  these  offices  are  paid  in  the  moneys  received 
by  the  government  in  payment  of  revenue,  while  the 
government  salaries  and  other  expenses  are  paid  out. 
This  portion  of  the  banking  department  forms  two  sides 
of  an  oblong  court,  once  the  little  churchyard  of  St. 
Christopher-le-Stocks,  in  which  is  an  elegant  parterre, 
with  some  healthy  trees  and  shrubs,  and  an  ever-flowing 
convolvulus-shaped  fountain,  which  is  supplied  by  a  well. 
Looking  into  this  elegant  court  from  the  north  is  the 
grand  court-room  of  the  bank,  where  the  directors  meet 
in  council  every  Thursday,  and  publish  those  announce- 
ments of  change  in  the  rate  of  discount  which  set  a-pal- 
pitating  the  city  of  gold,  and  sometimes  also  the  whole 
country.  Adjoining  is  the  committee-room,  where  three 
directors  attend  daily  to  supervise  the  business  of  the 
bank,  seldom  alone  ;  for  other  directors  generally  drop 
in,  animated  by  a  love  of  business,  and  attracted  also  by 
the  excellent  lunch  which  daily  makes  its  appearance  at 
one  o'clock. 

"  A  large  portion  of  the  bank's  business  makes  little 
show.  The  discounting  of  bills  is  the  most  important 
part  of  the  daily  operations,  but  very  properly  these 
operations  are  hidden  from  view.  A  man  who  has  a 
*  discount  account '  with  the  bank,  and  who  wishes  to 
cash  certain  bills  in  his  possession,  drops  them  in  the 
morning  into  places  like  letter-boxes,  and  returns  in  the 
afternoon  to  learn  the  fate  of  his  application.  Ordi- 
narily, the  bills  are  discounted,  as  a  matter  of  course  ; 
but  in  ticklish  times — and  these  are  the  very  occasions 


120  MONEY. 

when  money  is  most  needed  by  the  trader — many  a  heart 
palpitates  as  its  owner  awaits  the  decision  of  the  bank 
parlor.  But  still  larger  issues  are  occasionally  at  stake, 
when  the  representatives  of  great  firms  are  ushered  into 
the  court,  and  explain  the  state  of  their  affairs  with  a 
view  to  obtain  exceptional  assistance  in  order  to  tide 
over  some  great  but  temporary  embarrassment. 

"  Let  us  now  see  the  other  great  divisions  of  the  bank. 
The  issue  department  :  Leaving  behind  us  the  first  court 
which  we  entered  from  Threadneedle  Street,  with  its 
red-mantled  porters,  and  the  detective  in  plain  clothes 
who  seems  to  idle  his  time  over  a  newspaper  in  the  door- 
way, we  ascend  half-a-dozen  broad  steps,  and  enter  a 
hall  where  persons  are  getting  notes  exchanged  for  gold, 
or  gold  for  notes,  or  notes  for  others  of  equal  value. 
This  is  a  public  office  open  to  all,  whether  customers  of 
the  bank  or  strangers.  The  chief  applicants  here  are 
people  who  wish  to  exchange  their  notes  for  coin  ;  and 
as  these  notes  are  handed  in,  their  genuineness  is  care- 
fully ascertained  by  an  elaborate  but  rapid  process  of 
scrutiny.  In  the  northwestern  corner  of  the  building, 
if  you  are  provided  with  an  order,  you  may  see  the 
manufacture,  or  printing  of  the  notes  ;  and  in  another 
room,  you  may  inspect  the  stock  of  cancelled  notes, 
which  are  preserved  for  ten  years  after  being  returned 
to  the  bank.  Thus,  as  in  the  printing-office,  there  is 
always  a  stock  of  unfinished  notes,  still  wanting  the  date, 
number,  and  signature  ;  you  may  see  the  notes  in  em- 
bryo, as  it  were,  before  they  are  born,  and  also  after 
they  have  been  long  dead. 

"  In  the  centre  of  the  issue  department,  and  in  the 
very  heart  of  the  bank,  you  come  into  a  glass-roofed 


BANKING.  1 2  I 

court  ;  and  standing  on  the  landing-place  of  a  flight  of 
steps  which  leads  down  into  it,  you  see  below  you  men 
engaged  in  packing  or  unpacking  the  precious  metals, 
conveying  them  into  the  vaults  of  the  bullion  office,  or 
sending  them  away  in  vans.  There  you  may  see  the 
precious  ores  in  boxes  as  they  come  from  the  mines,  or 
returning  from  the  bank  refiners  in  glittering  ingots  ; 
the  silver  in  blocks  almost  as  large  as  a  common  brick, 
and  the  gold  of  similar  shape,  but  only  about  an  inch  in 
depth  ;  and  finally,  you  may  see  them  returning  from 
the  mint  in  the  shape  of  coin  packed  in  strong  boxes. 
The  packers  toss  about  the  ingots,  or  fill  with  bags  of 
coin  the  iron-bound  boxes,  with  an  equanimity  of  indif- 
ference which  seems  strange  to  on-lookers,  who  have 
never  seen  the  precious  metals  in  quantity.  The  bullion 
vaults,  as  might  be  expected,  are  exceedingly  strong 
chambers,  and  a  guard  of  soldiers  and  policemen  nightly 
keep  sentry  over  the  golden  treasure. 

"  For  the  coin  and  bullion  thus  brought  to  it  the 
bank  pays  either  in  its  notes,  or,  as  is  generally  the  case, 
simply  by  placing  the  amount  to  the  account  of  the 
depositors.  Thereafter  the  coin  or  bullion  no  longer 
belongs  especially  to  the  depositor,  but  equally  to  every 
one  who  keeps  an  account  at  the  bank,  or  who  holds 
any  of  its  notes. 

"  The  bank  is  bound  to  give  gold  for  all  its  notes  on 
demand,  and  also,  although  this  is  utterly  impossible,  to 
pay  all  its  deposits  likewise  in  gold  ;  but  the  persons  who 
brought  the  gold  have  no  other  claim  upon  the  bank's 
stock  of  the  precious  metal  than  that  which  is  common 
to  all  the  note-holders  and  depositors  alike.  The  gold 
has  been  sold  to  the  bank,  and  thereafter  any  one  who 


122  MOI^EY. 

has  an  account  with  the  bank,  or  who  holds  some  of  its 
notes,  may  draw  upon  its  stock  of  gold  at  his  pleasure. 

"  As  you  lean  over  the  brass-topped  balustrade,  look- 
ing at  the  coming  and  the  going  of  the  precious  ore,  you 
witness  operations  which  affect  the  whole  business  of  the 
bank,  and  to  a  great  extent  also  the  whole  trade  and  in- 
dustry of  the  country.  Every  van-load  of  gold  which 
enters  or  leaves  that  court  causes  a  rise  or  fall  in  the 
value  of  money,  by  increasing  or  diminishing  the  amount 
of  currency  available-  for  the  requirements  of  the  com- 
munity. The  reason  of  this  is  not  obvious,  but  it  is 
easily  explained. 

"  The  bank  is  authorized  by  act  of  Parliament  to  issue 
notes  to  the  amount  of  i4|- millions  sterling  (^14,650,000) 
upon  an  equal  amount  of  government  securities  which  it 
holds  ;  besides  this,  it  is  entitled  to  issue  an  amount  of 
notes  corresponding  to  the  value  of  the  gold  which  hap- 
pens to  be  in  its  vaults.  Hence  the  amount  of  money  in 
this  country  is  constantly  varying.  When  much  gold  is 
deposited  in  the  bank,  the  currency  is  increased  ;  when 
little  gold  is  deposited  in  the  bank,  the  currency  is 
diminished.  What  is  of  more  consequence,  the  value  of 
money  on  loan,  the  rate  of  discount,  is  affected  to  a  still 
greater  extent  by  every  variation  in  the  stock  of  gold  in 
the  bank's  vaults.  It  is  this  latter  process  which  invests 
with  such  critical  importance  the  entrance  or  exit  of  the 
gold-laden  vans  through  the  gates  of  the  Bank  of 
England. 

"In  'Currency  and  Banking'  Mr.  Bonamy  Price  re- 
marks that  '  up  to  the  passing  of  this  act,  it  was  open  to 
every  bank  or  private  person  to  put  forth  bank  notes. 
One  condition  only  was  imposed  as  a  guaranty  of  their 


BANKING.  123 

value — they  were  required  to  be  convertible,  payable  on 
demand.  Not  to  pay  a  bank  note  on  presentation  was 
an  act  of  bankruptcy,  and  the  issuer  passed  at  once  under 
the  laws  of  insolvency.* 

"There  probably  never  existed  a  law  whose  meaning 
has  been  so  vehemently  and  incessantly  disputed,  and  is 
disputed  still,  as  the  Bank  Charter  Act  of  1844.  No  one 
has  accused  it  of  obscurity  of  language.  What  it  pre- 
scribes is  most  simple,  easy  to  be  understood,  and  equally 
easy  of  execution.  No  one  raises  a  question  as  to  what 
is  legal,  and  what  is  not,  under  its  provisions  ;  yet  the 
significance  of  the  statute,  what  its  enactments  effect  or 
do  not  effect,  whether  it  is  a  revolution  or  beneficial  law, 
are  matters  of  the  most  differing  and  most  bitter  inter- 
pretation. It  is  regarded  as  the  destroyer  or  the  savior 
of  trade. 

"  The  act  divides  the  Bank  of  England  into  two  de- 
partments, one  tlie  banking  department,  the  other  the 
issue  department.  The  latter  is  exclusively  concerned 
with  the  issuing  of  notes.  That  operation  is  carried  out 
under  fixed  rules  laid  down  in  the  statute  ;  and  the  vital 
point  to  observe  here  is  that  the  corporation  called  the 
Bank  of  England  has  no  voice,  discretion,  or  control 
over  the  issues.  In  the  issue  department  the  bank  di- 
rectors have  no  more  authority  or  right  to  speak  or  act 
than  any  other  person  in  the  kingdom.  The  banking  de- 
partment is  the  Bank  of  England,  pure  and  simple,  as 
private  a  bank  as  any  other  bank  in  the  country.  As 
such,  as  a  private  bank,  it  possesses  two  advantages — a 
very  big  customer  in  the  government  account,  and  a 
special  benefit  from  the  bank  notes  conferred  on  it  by 
the  law. 


124  MONEY. 

"  The  act  limits  the  quantity  of  bank  notes  issued  by 
private  banks  in  the  nation  to  the  quantity  existing  at  the 
tirae  when  the  act  became  law.  If  any  of  these  private 
issuers  cease  to  issue,  the  bank  notes  assigned  to  them 
lapse,  and  the  amount  of  the  whole  private  issue  becomes 
permanently  reduced  by  nearly  that  amount.  The  Bank 
of  England,  the  private  bank  so  called,  is  authorized  to 
receive  from  the  issue  department  fourteen  millions  of 
notes,  with  a  certain  proportion  of  the  lapse  of  private 
issues  as  they  lapse.  The  quantity  stands  now  at  about 
fifteen  millions.  These  bank  notes  the  bank  receives 
from  the  issue  department,  which  in  reality  is  an  office  of 
the  state,  on  the  condition  that  it  shall  give  gold  for 
them  to  the  public  whenever  they  are  presented  for  pay- 
ment. Of  course  this  fact  may  be  regarded  as  meaning 
that  the  Bank  of  England  is  a  direct  issuer  of  notes  to 
the  extent  of  fifteen  millions  ;  but  it  is  far  simpler  and 
truer  to  look  upon  the  bank  as  a  receiver,  for  special 
reasons,  of  so  many  notes  from  the  sole  issuer,  the  office  of 
the  state,  called  the  issue  department.  The  bank  is 
subject  to  the  further  condition  that  it  shall  invest  these 
fifteen  millions  in  securities  on  which  it  receives  the  in- 
terest.    They  are  invested  at  three  per  cent. 

"  Bank-of-England  notes  are  declared  to  be  legal  ten- 
der everywhere  except  at  the  bank  itself  ;  the  bank 
cannot  pay  its  debts  with  bank  notes,  as  being  legal 
tender.     Any  of  its  creditors  may  decline  them. 

"  Every  note  is  payable  at  the  premises  of  the  Bank 
of  England,  some  out  of  its  private  resources,  the  re- 
mainder at  the  state  office,  called  the  issue  department. 
The  law  further  enacts  that  all  the  notes  issued  by  the 
issue  department  beyond  the  fifteen  millions  shall  be 


BANKING.  125 

covered  for  this  payment  by  a  deposit  of  gold  kept  in  the 
department.  The  whole  issue  thus  consists  of  two  parts  : 
one,  now  fifteen  millions,  assigned  to  the  Bank  of  Eng- 
land, and  payable  by  it  ;  the  remainder  put  forth  by  the 
issue  department  in  exchange  for  gold  given  to  it  by  the 
public,  and  kept  permanently  in  the  vault  to  guarantee 
convertibility." 

In  1844-5  Sir  Robert  Peel  settled  on  a  wise  principle 
the  constitution  of  the  Bank  of  England,  and  the  consti- 
tutions of  the  private  and  joint-stock  banks  of  England 
and  Wales,  of  Scotland  and  of  Ireland,  as  regards  the 
function  of  circulation.  The  principal  object  of  all  his 
measures  was  to  limit,  and  as  soon  as  possible  suppress, 
the  circulation  of  country-bank  notes,  and  replace  them 
in  the  first  instance  by  notes  of  the  issue  department  of 
the  Bank  of  England  ;  but  there  can  be  no  doubt  his  ul- 
timate intention  was  to  provide  for  the  supply  of  notes 
for  the  whole  kingdom  from  a  single  central  government 
office  as  soon  as  possible.  In  1844  it  was  not  thought 
possible  to  suppress  the  circulation  of  the  notes  then  in 
issue,  but  the  first  step  was  taken.  A  limit  was  fixed  for 
the  English  and  Welsh  banks  to  the  average  issue  of  the 
twelve  weeks  preceding  the  27th  of  April,  1844  (6  and  7 
Vict.,  c.  32)  ;  and  they  were  not  allowed  to  issue  notes 
beyond  the  maximum,  even  by  keeping  in  hand  gold 
coin  equal  to  the  whole  of  the  excess.  The  consequence 
is  that,  notwithstanding  the  growth  of  population  and 
trade  in  England  and  Wales,  in  thirty-four  years  the 
provincial  banks  have  now  only  a  note  issue  of  four  and 
a  quarter  millions,  instead  of  the  maximum  issue  of  six 
and  a  quarter  millions,  assigned  to  them  by  the  Act  of 
1844 — caused    partly    by    failure,    and    the    prospective 


126  MONEY. 

clause  in  that  act  which  provided  that  if  any  English  or 
Welsh  provincial  bank  commenced  business  in  London, 
it  should  forfeit  its  right  of  issue  at  its  country  branches. 
This  clause  compelled  the  National  Provincial  Bank  to 
relinquish  a  circulation  of  nearly  half  a  million  when  it 
opened  a  London  office.  Yet  no  such  penalty  was  im- 
posed by  the  Act  of  1845  on  the  Scotch  or  Irish  banks  ; 
and  of  late  years  the  Scotch  banks  have  taken  advantage 
of  the  omission  in  the  act  and  opened  London  ofifices. 
This  should  be  remedied,  as  there  should  be  no  partiality 
shown  by  the  law  ;  and  the  effect  of  the  legislation  gen- 
erally, of  the  Act  of  1845,  has  been  more  in  favor  of  the 
Scotch  banks  than  the  English  and  Welsh  ;  as  the  Act 
of  1845  (8  and  9  Vict.,  c.  38),  by  limiting  the  future  note 
issues  of  the  then  existing  Scotch  banks  to  the  average  of 
the  year  ended  on  May  i,  1845, — viz.,  two  and  three- 
quarter  millions, — and  requiring  for  all  notes  issued  in 
excess  of  that  sum  that  the  Scotch  banks  hold  in  hand 
gold  for  the  same,  virtually  gave  the  monopoly  of  circu- 
lation in  Scotland  to  the  banks  existing  there  in  1845, 
and  has  prevented  the  formation  of  any  new  bank.  The 
permission  to  issue  notes  beyond  the  statutory  maximum 
on  condition  of  holding  gold  coin  for  the  excess,  has  en- 
abled the  Scotch  banks  to  keep  pace  with  the  growth  of 
trade  ;  and  we  find  the  note  issue  averages  the  last  few 
years  six  and  a  quarter  millions,  or  about  three  and  a 
half  millions  in  excess  of  what  it  was  in  1845.  The 
Scotch  banks  have  made  great  progress  from  1870  to  the 
half-year  ending  June  30,  1878.  Their  paid  up  capital 
has  increased  from  eight  and  three  quarters  to  ten  mil- 
lions ;  their  reserves  from  three  and  a  half  to  five  and  a 
half  millions  ;  their  note  circulation  from  five  and  three 


BANKING,  127 

quarters  to  six  and  a  quarter  millions  ;  their  deposits 
from  sixty  to  seventy-seven  millions  ;  and  their  accept- 
ances from  four  to  eight  millions  ;  or,  in  total,  the  banks 
increased  their  liability  to  their  proprietors  from  twelve 
and  a  quarter  to  fifteen  and  a  half  millions,  and  to  their 
customers  from  seventy  to  ninety-one  millions.  The 
Scotch  banks  have  never  paid  so  well  as  the  English. 
Fully  one  fourth  of  the  sums  invested  in  the  latter  pay 
over  15  per  cent.,  whereas  13  per  cent,  is  an  exceptional 
rate  for  a  Scotch  bank  to  pay,  because  they  act  more 
justly  towards  their  customers,  and  pay  "  daily  interest  " 
on  deposits,  etc.  ;  customers  getting  part  of  the  profit 
made  by  the  use  of  their  money,  the  shareholders  of 
course  getting  less. 

The  Bank  of  England  has  been  very  useful,  but  the 
time  has  passed  for  monopolies  of  any  kind,  however 
seemingly  beneficial.  All  must  be  equal  before  the  law, 
and  subject  to  the  same  conditions.  It  is  simply  absurd 
to  restrict  either  the  Scotch,  Irish,  or  provincial  banks  of 
issue,  because  they  have  a  branch  or  branches  in  London. 
All  banks  wishing  to  do  so,  should  have  the  power  to 
issue  notes  if  they  give  the  necessary  security  and  com- 
ply wath  the  government  conditions  ;  but  the  security 
must  be  real,  and  must  be  deposited  with  the  government  ; 
and  power  to  issue  notes  not  be  permitted  upon  a  ban- 
ker's statement  that  he  has  so  much  gold  in  his  coffers, 
unless  the  same  be  checked  by  a  government  official. 
The  note-issue  arrangement  wants  altering  altogether, 
and  notes  by  provincial  banks  should  be  at  once  abol- 
ished. Why  should  the  York  Bank  have  had  the  power 
to  issue  notes  to  the  extent  of  ^46,387  without  security  ; 
or  any  bank  be  allowed  for  a  day  longer  so  to  do  ?     The 


128  MONEY. 

Scotch  system  has  worked  well  ;  but  times  are  altered, 
and  the  facilities  offered  by  open  credits,  "overdrawn  " 
accounts,  etc.,  are  greater  than  they  otherwise  would  be, 
because  of  the  "  note  "  system.  The  spirit  of  the  act  is 
complied  with  in  their  issue,  but  the  principle  is  broken. 
Sir  Robert  Peel  intended,  as  with  the  Bank  of  England, 
that  for  every  note  issued  there  should  be  gold  to  meet 
the  same  lodged  in  the  banker's  vaults.  The  Scotch 
banks  may  have  gold  enough  in  their  possession  to  meet 
the  notes  issued  beyond  their  authorized  fixed  issue,  but 
where  is  the  gold  to  meet  all  their  deposits  and  other 
liabilities  ?  Or  why  should  the  Scotch  banks  have  power 
to  issue  notes  over  two  millions  in  value,  without  having 
in  hand  gold  to  meet  them  ;  or  the  Irish  banks  be  allowed 
to  issue  to  the  extent  of  six  and  a  quarter  millions,  and 
only  have  three  millions  of  gold  and  silver  in  readiness 
to  meet  the  same  ?  The  whole  thing  wants  revision. 
The  Act  of  1844  was  a  compromise  at  the  time  with 
vested  interests  ;  but  the  power  given  to  certain  banks, 
whether  solvent  or  not,  to  continue  to  issue  an  immense 
amount  of  "  promises  to  pay  "  without  any  security 
whether  they  can  do  so  or  not,  after  the  failure  of  the 
City  of  Glasgow  Bank  and  the  York  Bank,  etc.,  ought  at 
once  to  be  the  subject  of  inquiry.  No  bank  should  be 
allowed  to  issue  their  own  notes.  Every  banker  should 
have  the  privilege  of  getting  notes  from  the  government 
office  of  issue,  by  depositing  the  necessary  security  ;  and 
the  notes,  like  other  promissory  notes,  should  be  stamped 
when  issued  by  the  government,  and  the  stamp  defaced 
when  the  notes  are  returned.  All  distinction  between 
London  banks  and  provincial  banks,  Irish  or  Scotch 
banks,  should   cease  ;  and  every  banker  be  allowed  to 


BAA' KING.  129 

open  where  he  pleases,  like  any  other  trader.  It  is  the 
duty  of  all  governments  on  behalf  of  the  people  they 
represent  to  oppose  and  not  to  create  monopolies.  It 
seems  ridiculous  that  an  English  provincial  bank,  be- 
cause it  is  a  bank  of  issue,  must  not  have  branches  in 
London  or  its  neighborhood  ;  and  thus  bankers  were 
naturally  annoyed  at  the  Scotch  banks  enjoying  a  privi- 
lege they  were  by  law  debarred  from — a  most  unjust 
distinction.  On  the  other  hand,  the  London  joint-stock 
banks  naturally  objected  to  opponents  in  their  midst  who 
had  the  advantage  of  using  largely  a  spurious  floating 
capital — viz.,  bank  notes.  The  private  banks  of  course 
object  to  unlimited-  or  limited-liability  banks.  But  com- 
petition is  the  best  protection  for  the  public,  and  private 
interests  must  succumb  to  the  national  good — with  banks 
as  others. 

Credit  is  universal  ;  it  is  another  word  for  lending 
goods  on  trust — a  system  of  deferred  payment.  It  is  a 
system  of  business  of  immense  utility,  and  quite  justifiable 
with  manufacturers,  merchants,  and  all  wholesale  opera- 
tions. Great  sagacity  is  needed  to  understand  who  to 
trust,  how  much  to  trust,  when  to  cease  trusting  any  one. 
It  has  its  drawbacks,  tempting  men  to  overbuy  when 
houses  foolishly,  recklessly  credit  weak  houses  as  if  they 
were  strong,  or  tempt  people  by  dating  on  and  too  long 
credit.  But  there  are  advantages  connected  with  the 
system  of  great  value.  Banking  is  essential  to  the  credit 
system  ;  the  credit  could  not  be  given  without  the  aid 
of  the  banker.  The  manufacturer  or  wholesale  merchant 
sells  the  retailer  goods  to  be  paid  for  in  a  clear  month, 
and  then  if  the  retailer  cannot  pay,  he  has  to  give  a  bill 
at  three  or  four  months'  date.     The  banker   takes  the 


130  MONEY. 

bills,  and  thus  relieves  the  merchant  from  having  to  wait 
till  the  bill  is  due.  Banking,  you  will  perceive,  is  a 
machinery  for  lending  money  in  anticipation  of  these 
deferred  payments  ;  and  bankers  by  this  action  enable  a 
vast  increase  of  industry  and  trade  to  be  developed.  But 
distinctly  understand,  lending  and  exchanging  do  not 
create,  but  simply  place  wealth  in  different  hands.  Credit 
is  simply  deferred  payment  ;  bills  of  exchange  simply 
enable  the  creditor  to  transfer  his  debt  to  his  banker  ; 
but  they  are,  one  and  all,  parts  of  a  complicated  system, 
through  buying  on  credit,  instead  of  buying  with  money. 
A  banker  is  a  dealer  in  money  ;  he  is  an  intermediate 
party  between  the  borrower  and  the  lender.  There  may 
be  said  to  be  two  great  divisions  of  England  :  the  rapidly 
growing  districts,  or  the  rising  men,  who  can  easily  em- 
ploy any  amount  of  money  ;  and  the  stationary  or  de- 
clining districts,  or  the  men  who  have  retired,  who  have 
more  money  than  they  could  use.  So  the  banker  bor- 
rows of  one  party  and  lends  to  another  ;  and  the  differ- 
ence between  the  terms  at  which  he  borrows  and  those 
at  which  he  lends  forms  the  source  of  his  profit.  A 
banker  is  useful,  because  he  draws  out  of  the  pockets  of 
the  people  their  reserve  cash  that  would  otherwise  be 
idle,  and  puts  the  same  into  active  operation  ;  money 
that  would  have  been  unproductive  in  the  hands  of 
private  individuals  becomes  by  means  of  the  banker 
productive,  by  furnishing  accommodation  to  those  who 
have  need  of  additional  capital  to  carry  on  their  com- 
mercial transactions.  The  banker  is  a  broker  between 
two  principals,  and  charges  his  commission  for  the 
service  he  renders  ;  but  there  is  this  important  distinc- 
tion :  the  banker  takes  all  the  risk  ;  if  the  man  he  lends 


BANKING.  131 

the  depositor's  money  to  does  not  pay  him,  he  is  com- 
pelled to  restore  the  sum  deposited  to  the  depositor  on 
demand.  So,  to  understand  his  function,  it  is  best  to 
regard  the  banker  as  a  dealer,  a  buyer  and  seller  of 
money  ;  and  as  correct  banking  is  of  the  utmost  im- 
portance, it  being  a  branch  of  trade  that  is  intimately 
connected  with  every  man's  business,  the  subject  of 
money  and  of  banking  should  be  more  attentively  con- 
sidered and  thought  of  by  the  people  at  large.  Banking 
is  both  an  art  and  a  science.  The  knowledge  of  it  as  a 
science  may  be  acquired  like  that  of  other  sciences,  by 
reading,  observation,  and  reflection. 

But  the  art  of  banking,  as  of  every  thing  else,  can  only 
be  acquired  by  serving  an  apprenticeship  thereto  ;  and 
when  you  consider  how  few  persons  there  are  who  can 
invest  their  own  spare  capital  wisely  and  profitably,  you 
will  have  some  idea  of  the  peculiar  and  special  qualities 
necessary  to  manage  banks  like  the  London  and  West- 
minster, Union,  Joint-Stock,  etc.  The  responsibility  of 
receiving  money  on  deposit  when  people  like  to  give  you 
the  same,  and  of  finding  safe  and  remunerative  channels 
for  the  same,  to  invest  very  large  sums  of  money  at  all 
times,  so  as  safely  to  see  a  profit  and  yet  pay  the  deposi- 
tors the  current  rate  for  money  on  deposits,  is  a  very 
serious  and  responsible  position  for  any  man  to  fulfil, 
and  needs  a  man  of  sound  common-sense,  of  practical 
mind,  with  well  defined  principles  of  action  for  his  guid- 
ance, as  there  is  no  time  for  deliberation.  A  wants  to 
deposit,  B  wants  to  borrow  ;  you  must  know  whether 
it  is  policy  to  receive  or  refuse  the  deposits,  whether  it  is 
safe  to  grant  or  refuse  the  loan,  whether  to  take  all  the 
bills  offered,  or  if  it  be  necessary  carefully  to  scrutinize 


132  MONEY. 

and  reject  some  ;  whether  the  borrower  is  to  be  helped 
upon  the  best,  or  upon  what  terms  you  should  lend  ; 
whether  to  lend  for  a  specified  time,  taking  the  cus- 
tomer's bill  and  holding  his  deeds  as  collateral  security, 
or  to  open  a  loan  account,  and  if  so,  how  far  with  safety 
you  can  lend  upon  the  securities  that  he  deposits  with 
you.  He  has  also  to  calculate  how  much  money  to  keep 
invested  in  exchequer  bonds,  consols,  and  other  govern- 
ment securities,  and  how  much  cash  to  keep  in  hand  to 
meet  the  current  demands  of  the  head  and  branch 
offices. 

The  banker  should  be  a  thorough  man  of  business, 
possessing  the  valuable  combination  of  a  number  of 
qualities,  not  in  themselves  individually  of  a  striking 
character,  but  rare  only  in  their  combination  in  the 
same  person  ;  the  possession  of  a  well  balanced  mind, 
giving  that  wisdom  we  call  common-sense,  which  can 
only  arise  from  the  due  proportion  of  all  the  faculties. 
If  you  consider  the  number  of  bankers  that  fail  in  pro- 
portion to  the  small  number  of  banks,  you  will  agree 
with  me  that  to  be  a  good  and  successful  banker  requires 
qualities  as  rare  and  as  important  as  those  wliich  are 
necessary  to  attain  eminence  in  any  other  pursuit.  Bank- 
ing is  profitable  because  it  is  carried  on  chiefly  with  other 
people's  money.  They  borrow  of  A  under  the  bank  rate, 
and  lend  to  B  at  or  above  the  bank  rate  ;  they  pay  inter- 
est to  A,  the  lender  ;  at  the  end  of  the  six  months,  they 
deduct  it  from  B,  the  borrower,  when  they  lend  him  the 
money.  But  their  capital,  upon  an  average,  is  not  one 
twentieth  part  of  the  money  they  hold  of  other  people's ; 
and  if  they  can  lend  to  others  what  is  lent  to  them,  un- 
less they  by  want  of  judgment  make  bad  debts,  banking 


BANKING.  133 

must  pay  a  large  interest  upon  the  share  capital,  as  they 
have  also  the  advantages  of  the  accumulated  balances  of 
all  the  current  accounts  ;  so  that  there  is  a  certain  profit 
upon  all  money  lent  to  them. 

The  chief  source  of  a  banker's  profits  arises  from  his 
facilities  for,  and  skill  in,  investing  the  aggregate  of  the 
sums  entrusted  to  his  care,  yet  so  placed  as  to  be  readily 
available  in  case  of  need  or  an  emergency.  This  is  the 
most  difficult  part  of  the  matter  ;  it  is  easy  to  invest,  but 
not  to  do  so  and  be  able  to  realize  at  any  moment  with- 
out loss.  Still  the  banker's  profits  will  depend  upon  the 
moneys  entrusted  to  his  care,  and  it  follows,  therefore, 
that  within  certain  limits  it  is  the  endeavor  of  every 
banker  to  increase  the  deposits  to  the  greatest  possible 
extent  in  every  legitimate  way.  Depositors  may  roughly 
be  divided  into  three  classes.  First,  the  large  class, 
really  the  backbone  of  any  banking  system,  those  who, 
too  timid  to  trust  their  capitals  to  investments  in  rail- 
ways, foreign  bonds,  or  such  like  fluctuating  securities, 
deposit  their  money  with  a  banker,  satisfied  at  receiving 
in  return  interest  at  the  rate  of  one  per  cent,  under  the 
Bank-of-England  rate,  or  the  rate  agreed  upon  and  ad- 
vertised by  the  leading  joint-stock  banks.  The  second 
important  class  of  customers,  on  which  to  a  large  extent 
the  prosperity  of  a  bank  depends,  consists  of  merchants 
and  others,  who,  for  the  sake  of  the  convenience  of  their 
business,  leave  in  their  bankers'  hands  a  balance,  paying 
in  and  drawing  out  daily,  but  always  leaving  a  balance, 
and  the  bankers  being  compensated  for  their  trouble  by 
allowins;  no  interest  on  the  balances  of  such  accounts. 
Large  permanent  balances  yielding  no  interest  are  not  to 
be  expected,  but  in  the  aggregate  an  approximate  sura 


134  MONEY. 

may  be  relied  upon,  as  it  is  only  the  few  keen  business 
men  who  study  finance,  or  know  the  value  of  money,  and 
therefore  use  it,  making  what  they  can  of  it  as  they  get 
it  ;  the  majority  wait  for  their  regular  pay  days,  whilst 
others  will  lose  their  discount  with  a  creditor  rather  than 
reduce  their  balance.  It  is  very  pleasant  to  know  you 
have  a  good  balance — the  banker  has  no  objection  ;  but 
economically  it  is  a  great  error  of  judgment,  it  being 
much  wiser  to  a?iticipate  znd  prepay  your  creditors  if  you 
have,  or  when  you  have,  any  sum  at  your  bankers  beyond 
what  is  needed  for  the  necessary  balance.  The  third 
very  numerous  class,  especially  in  the  provinces,  is  made 
up  of  those  traders  in  a  small  way  of  business  who  keep 
a  banker  because  it  looks  well,  but  whose  capital  does 
not  enable  them  to  keep  the  necessary  balance  required 
by  bankers,  and  for  the  accommodation  a  "  yearly  com- 
mission "  is  charged.  This  commission  ought  to  be  as 
low  as  possible,  as  it  is  policy  to  encourage  all  traders  to 
keep  a  banker  and  deposit  daily  the  sums  they  receive 
with  their  banker.  In  Scotland  interest  is  given  on  all 
balances,  and  the  "  canny  Scotch  "  are  taught  how  "  siller 
will  breed  siller,"  for  the  total  deposits  of  the  eleven 
principal  Scotch  banks  exceed  the  respectable  aggregate 
of  eighty  millions  sterling — a  most  convincing  proof  that 
**many  a  mickle  will  make  a  muckle."  With  bankers, 
as  with  traders,  the  generous  policy  will  always  tend  to 
their  profit.  Equitably,  it  seems  that  beyond  a  fixed 
minimum  balance,  interest  should  be  allowed  on  the 
residue,  and  interest  charged  when  balance  is  below  the 
sum  fixed  as  the  minimum  balance  necessary  to  pay  the 
bankers  for  keeping  the  account. 

It  is  of  great  advantage  to  a  country  for  its  people  to 


BANKING.  135 

be  able  to  take  their  money  and  deposit  it  safely,  and  be 
paid  for  its  use  by  others  when  it  cannot  be  used  profit- 
ably by  one's  self.  Bankers  thus  get  the  power  to  lend 
money.  And  my  own  experience  will  be  confirmed  by 
others,  when  I  say  that  any  honest,  solvent  man  can 
borrow  of  his  bankers  more  w-illingly,  more  pleasantly, 
and  at  a  less  rate  of  interest  than  he  can  of  father, 
brother,  or  friend.  To  manufacturers  and  commercial 
men  the  banker  is  truly  the  "  friend  in  need  "  :  if  you 
deserve  his  confidence  he  is  ever  willing  to  give  it  ;  and 
he  is  the  very  antithesis  of  Shylock,  a  veritable  Portia  in 
his  judgment,  taking  your  word  and  helping  you  to  an 
extent  that  can  only  be  appreciated  by  those  who  have 
tried  other  sources  and  found  them  wanting.  The 
banker  is  not  only  useful  to  the  individual — he  does 
good  service  to  the  state  by  increasing  the  productive 
powers  of  capital,  viz.,  by  economizing  the  capital 
already  in  a  state  of  employment  ;  by  the  system  of 
deposits,  he  gives  employment  to  capital  that  would 
otherwise  be,  at  all  events  temporarily,  non-productive  ; 
by  the  issue  of  his  own  notes,  he  virtually  creates  capital 
by  the  substitution  of  credit.  Banking  therefore  pro- 
motes the  prosperity  of  the  country,  by  increasing  the 
amount  and  efficiency  of  its  capital.  In  the  history  of 
commerce  we  find  no  principle  more  firmly  established 
than  this,  that  as  the  capital  of  a  country  is  increased, 
agriculture,  manufactures,  commerce,  and  industry  will 
flourish,  and  where  capital  is  diminished  these  will 
decline.  The  man  who  attempts  to  annihilate  any 
portion  of  the  capital  of  the  country  in  which  he  dwells, 
is  as  forgetful  of  his  own  advantage  as  the  miller  who 
should  endeavor  to  dry  up  the  mountain  stream  which 


136  MONEY. 

turns  the  wheels  of  his  machinery,  or  the  farmer  who 
should  desire  to  intercept  the  sun  and  the  showers 
which  fertilize  his  fields.  So  the  banker  must  be  held  in 
respect,  and  have  a  people's  confidence,  as  it  is  essential 
to  the  prosperity  of  the  nation  that  the  people  generally 
have  faith  in  him,  and  will  hasten  to  open  accounts  or 
deposit  their  surplus  money  with  him.  Individually  they 
may  be  of  small  amount,  but  collectively  they  make  a 
considerable  sum,  which  the  banker  employs,  must  em- 
ploy, for  his  own  interest,  in  granting  facilities  to  those 
who  are  engaged  in  trade  and  commerce.  Thus  these 
little  rivulets  of  capital  are  united  and  form  a  powerful 
stream,  which  propels  the  wheels  of  manufactures  and 
sets  in  motion  the  machinery  of  industry. 

The  Economist  puts  the  estimated  deposits  of  banks  in 
the  United  Kingdom  at  the  following  dates  :  Bank  of 
England  stated  separately  : 

Bank  of 
Say  autumn,  1878  :  England.  In  all  say 

£  £  £  £  £ 

527,000,000  or  530,000,000.  .  .24,000,000.  .  .550  to  560,000,000 
Say  spring,  1879  ; 

460,000,000  or  470,000,000. .  .38,000,000. .  .500  to  510,000,000 

This  is  an  approximate  estimate  of  the  deposits  held 
by  bankers  throughout  the  United  Kingdom,  not  exact, 
but  to  be  understood  generally  as  showing  the  position 
of  banking  deposits  at  the  two  periods  stated.  The  fig- 
ures indicate  clearly  the  want  of  confidence  generally  ; 
the  deposits  in  the  joint-stock  and  private  banks  being, 
in  the  spring  of  1879,  60  millions  less  than  in  the  autumn 
of  1878  ;  but  the  deposits  in  the  Bank  of  England  are 


BANKING.  137 

14.  millions  in  excess — an  increase  of  over  one  third  of 
money  deposited  simply  for  safety,  bearing  no  interest,  and 
the  greater  part  of  the  residue,  no  doubt,  being  kept  by 
people  themselves  ;  the  failure  of  the  City  of  Glasgow 
Bank  having  caused  a  general  mistrust  of  bankers. 
That  this  is  so,  the  diminution  in  deposits  with  the 
Scotch  banks  affords  conclusive  evidence,  as  the  depos- 
its with  Scotch  banks  were  : 

May  iS,  1878 ;^78, 000,000 

October  19,   1878  (including   City  of   Glasgow    Bank, 

;^8,ooo,ooo,  and  Caledonian  Bank,  ;,f  1,000,000)  .  .  78,000,000 

May  17,  1879 67,000,000 

Or  II  millions  less  in  seven  months  ;  and  allowing 
;j£'9,ooo,ooo  for  the  City  of  Glasgow  and  Caledonian 
banks,  there  is  still  a  diminution  of  two  millions  in  the 
deposits.  This  want  of  confidence  is  a  serious  matter, 
as  the  increase  of  deposits,  the  development  of  banking, 
is  essential  to  our  progress  ;  it  has  helped  us  the  last 
forty  years  more  than  any  thing  else,  and  to  banking  we 
must  look  for  help  in  the  future. 

Every  one  should  keep  a  banker.  Your  money  is 
lodged  in  a  place  of  security,  and  you  avoid  all  anxiety 
as  to  loss,  as  money  is  never  safe  in  one's  pockets,  and 
it  is  not  prudent  to  keep  more  in  the  till  than  is  abso- 
lutely necessary,  or  after  business  hours.  To  all  those 
who  may  reply,  they  can  do  without  a  banker,  my 
answer  is,  you  can  do  much  better  with  one.  The  sav- 
ing of  time  is  an  important  advantage,  as  it  enables  you 
to  pay  all  accounts  by  check,  and  transfers  the  trouble 
of  the  real  payment  to  your  banker.  But  the  most  im- 
portant point  is,  its  acting  as  a  check  upon  your  cash 


138  MONEY. 

account.  I  advise  every  man,  whether  in  trade  or  not, 
to  have  a  banking  account,  and  to  pay  into  his  banker 
all  the  sums  he  receives  during  the  year,  and  never  to  pay 
anybody  an  account  except  by  a  check  upon  the  banker, 
drawing  checks  for  his  personal  expenses,  or  adding  the 
same  to  his  petty  cash  check  drawn  weekly,  and  ac- 
counted for  in  his  books.  The  banking  account  will  thus 
be  a  record  of  all  the  cash  received,  the  cash  paid,  who 
to,  and  what  for,  during  the  year.  I  was  consulted  recently 
by  a  gentleman  who  had  lent  a  "  friend  "  nearly  two 
thousand  pounds,  and  nearly  seven  hundred  pounds  of 
which  he  could  render  no  account  of.  I  asked  him  to 
lend  me  his  "  bank  book,"  and  by  it  was  enabled  to  make 
out  the  account  and  prove  the  claim. 

Assuming  you  have  made  up  your  mind  to  keep  a 
banker,  the  next  thing  to  do  is  to  determine  at  what  bank 
you  will  open  your  account.  Nearly  every  man  has  a 
prejudice  for  or  against  some  particular  bank  ;  but  we 
have  so  many  first-class  joint-stock  banks  now  of  nearly 
equal  merit,  that  the  wiser  plan  is  to  select  that  bank  or 
branch  of  a  bank  nearest  to  your  place  of  business  hold- 
ing the  position  of  the  London  and  Westminster,  or 
Union,  or  National  Provincial.  As  time  is  money,  when 
making  a  decision,  you  must  remember  the  time  taken  up 
in  going  to  your  banker,  and  the  greater  probability  of  loss 
the  farther  the  bank  may  be  from  your  place  of  business. 
There  are  times  in  nearly  every  one's  career  when  it  is 
essential  that  his  creditors  and  bankers  have  implicit 
faith  in  him  ;  when  it  rests  with  them,  by  helping  or 
refusing  to  help  at  a  crisis  in  one's  faith,  to  materially 
help  forward  or  retard  your  progress,  or  perhaps  save 
you  from  ruin.     Many  a  house  of  good  standing  in  times 


BANKING.  139 

of  panic  needs  a  helping  hand,  or,  at  all  events,  they  do 
not  want  the  help  hitherto  given  freely  to  be  restricted 
or  withdrawn  by  their  banker,  or  their  credit  shortened 
by  their  creditors,  at  these  critical  periods.       Therefore, 
I  advise  every  one  to  be  open  and  straightforward  alike 
with   their  creditors  and  bankers  ;  and  in  opening  ac- 
counts with  either,  or  when  starting  in  life,  to  tell  them 
plainly  your  position,  and  never  represent  yourself  to  be 
a  richer  man  than  you  are  ;  accept  no  bills  you  are  not 
likely  to  meet, — better  ask  for  a  month  longer  before  so 
doing,  if  there  should  be  any  doubt  ;  and  never  discount 
with  your  banker  any  bills  that  are  not  likely  to  be  paid 
when  due  ;  and  remember,  you   must  so   arrange  your 
own  balance  that  if  any  bills  be  dishonored  you  can  repay 
them    yourself.       Never   overdraw    your    account,    and 
before  opening  discount  account  or  loan  account,  see  the 
banker  or  manager  yourself,  and  have  a  distinct  under- 
standing with  him  as  to  the  terms  on  which  he  will  dis- 
count your  bills,  whether  at  bank  rate  or  half  per  cent., 
or  one  per  cent,  above  rate  ;  also  the  amount  of  loan, 
and  rate  of  interest,  and  if  it  can  be  renewed,  or  when  to 
be  repaid.       Men  with  a  large  business  to  attend  to,  or 
bankers,   are  fully   occupied,  and  when  you   call  upon 
either    upon   any   subject  of   importance,   be  punctual  ; 
keep  to  the  object  of  your  visit,  proceed  to  the  business 
you  have  called  about,  and,  as  soon  as  it  is  over,  leave. 
Remarks  about  weather,  news  of  the  day,  etc.,  indicate  a 
want  of  earnestness,  as  though  the  mind  was  not  suffi- 
cietly  firm  or  earnest  about  the  matter  in  view.     "  The 
tree  is  known   by  its   fruit  ;  men  do  not  gather  grapes 
from  thorns,  or  figs  from  thistles."    A  bank  is  an  institu- 
tion   for  the   transfer   of   debts  ;  herein,  so    far   as  the 


I40  MONEY. 

nation  is  concerned,  is  its  principal  value.  People  talk 
of  money  being  cheap  or  dear,  abundant  or  scarce,  for- 
getting that  banking  transactions  may  be  enormously 
increased  or  diminished  without  any  change  in  the 
quantity  of  money  circulating.  Banks  principally  deal 
in  checks  and  bills  of  exchange.  These  are  the  results 
of  sales  or  purchases.  Every  one  of  those  paper  trans- 
fers at  their  origin  denote  property  bought  and  paid  for  ; 
every  man  who  gives  a  check  or  a  bill  has  bought  some- 
thing in  exchange  ;  and  every  man  who  gives  the  check 
or  bill  to  his  banker  has  previously  sold  something,  and 
hands  the  paper  to  his  banker  to  collect  the  payment  for 
him,  and  then  he  in  turn  buys  and  orders  the  banker  to 
pay  for  the  purchase  out  of  bills  or  checks  previously 
deposited  with  him.  The  resources  of  banks  proceed 
from  goods  sold,  of  which  they  collect  the  payment.  So 
you  will  perceive  it  is  still  barter,  but  of  a  higher  kind. 
Goods  still  buy  goods  ;  one  set  of  goods  is  exchanged 
for  another,  either  with  money  as  the  medium,  or  with 
the  intelligent  medium,  the  banker,  who  is  made  to  take 
the  place  of,  but  acts  precisely  as,  a  sovereign  ;  he  is  an 
instrument  of  exchange.  He  transfers,  like  the  sovereign, 
purchasing  power  from  A  to  B.  He  receives  the  check 
for  which  goods  have  been  sold,  or  a  debt  to  collect,  and 
passes  it  on  in  the  form  of  a  debt  he  creates.  That  pur- 
chasing power  resides  in  the  goods  sold,  directly  or  in- 
directly, by  the  banker's  depositor.  It  is  because  the 
depositor  has  sold  corn  that  the  banker  is  enabled  to 
authorize  the  merchant  to  buy  tea. 

Banking  may  be  defined  as  the  power  that  enables  A, 
who  has  a  balance  to-day,  to  lend  it  to  B,  who  is  short, 
and  that  lends  to  A,  when  short,  the  balance  of  B.     Its 


BANKING.  141 

main  value  consists  in  its  holding  the  collective  balances 
and  utilizing  them  ;  and  the  power  is  greatly  increased 
by  the  clearing-house,  one  of  the  most  important  collect- 
ing agencies  ever  introduced  ;  the  checks  upon  each 
banker  being  collected,  debited,  and  credited,  and  a 
check  for  the  balance  given.  Thus  we  see  the  bank  is 
an  intermediate  agent,  like  money  itself — a  medium  of 
doing  the  work  of  money  without  having  to  use  it.  A 
sells  corn,  and  not  wanting  the  money,  does  not  lend  it 
himself,  but  gives  it  to  his  banker,  who  does  ;  B  wants 
to  buy  tea,  but  has  not  the  money,  only  bills  by  him  ;  A 
would  not  lend  his  money  to  B,  but  the  banker  does.  In 
reality  it  is  A's  money  that  is  lent.  The  banker  is  the 
broker,  who  finds  a  borrower  ;  his  profit  is  the  extra  dis- 
count he  charges  B  to  what  he  pays  A.  A  has  paid  the 
sum~in  by  check,  B  draws  it  out  by  check  ;  both  checks 
go  to  the  clearing-house.  Thus  you  see  the  value  of 
banking  ;  it  is  a  benefit  to  A  and  B  and  a  profit  to  the 
banker,  and  no  metallic  money  is  needed  in  the  matter. 
You  must  distinctly  understand  this  :  the  great  value  of 
banking  is  its  action,  being  similar  to,  but  doing  without 
the  aid  of,  coin.  But  the  only  true  definition  of  banking 
is  that  it  places  ])roperty  in  different  hands.  So  you  will 
at  once  perceive  that  the  ability  of  banks  to  assist  trade 
and  the  rate  of  discount  do  not  depend  upon  bankers,  but 
on  the  state  of  the  wealth  of  the  country,  and  in  the  effect 
which  it  produces  on  the  two  principles  which  the  bank 
has  brought  together.  The  banker's  value  is  in  the  op- 
portunities his  position  affords  him  to  select  the  men  into 
whose  hands  the  wealth  moved  by  his  agency  is  to  be 
committed.  He  neither  created  the  wealth  which  his 
depositors   sold,  nor  does   he   touch   that   other  wealth 


142  MONEY. 

which  his  borrowers  purchase  ;  but  it  signifies  immensely 
to  what  sort  of  borrowers  he  gives  the  means  of  buying, 
by  empowering  them  to  draw  checks  upon  his  bank. 
(Overend,  Gurneys,  the  City  of  Glasgow  Bank,  the 
West  of  England  Bank,  failed  from  this  reason,  and 
they  prove  the  power  in  the  hands  of  bank  mana- 
gers and  directors.)  Upon  the  judgment  of  the 
banker  will  depend  whether  the  bank  fails  or  grows, 
pays  fair  interest  to  its  shareholders,  or  ruins  them  ; 
and  on  him  also  mainly  depends  whether  the  money 
be  advanced  to  men  who  will  use  it  wisely  or  reck- 
lessly, whether  it  be  lent  to  men  who  will  use  it  as 
capital  in  processes  which  reproduce  its  consumption,  or 
to  men  who  will  waste  and  destroy  it  in  prodigal  expen- 
diture, unskilful  trade,  or  in  reckless  speculation  in  busi- 
ness, in  unprofitable  mines,  or  in  making  railways,  where 
they  cannot  for  a  long  period  of  years  reproduce  to  the 
country  the  food,  clothing,  and  material  their  construc- 
tion consumed.  He  is  not  the  capitalist  the  vulgar  herd 
imagines  ;  his  capital  is  trifling,  insignificant.  The  pub- 
lic must  not  be  misled  by  the  capital  of  a  bank  ;  it  all 
depends  on  the  man  with  whom  rests  this  mighty  power 
of  selecting  the  men  to  whom  the  country's  wealth  shall 
be  entrusted — a  glorious  position,  needing,  if  not  a 
genius,  a  man  of  clear  perception,  sound  common-sense, 
and  great  moral  power. 

The  Americans  tax  the  capital  of  their  banks  ;  the 
English  tax  their  notes,  their  bills,  their  bonds,  their 
transfers.  The  latter  plan  seems  preferable,  as  the  banks 
are  taxed  in  proportion  to  their  business  ;  but  the  duty 
is  too  heavy  upon  the  transfer  of  shares  in  joint-stock 
banks.     It  seems  hardly  fair  that  a  transfer  of  shares  in  a 


BANKING.  143 

joint-stock  bank  should  pay  the  same  tax  as  a  transfer 
of  a  landed  estate  of  equal  value.  The  estate  will  proba- 
bly not  be  sold  again  for  a  lifetime  ;  the  shares  in  the 
bank  may  change  hands  several  times  in  a  year.  If  the 
tax  were  lightened,  the  transfers  would  be  more  numer- 
ous, and  possibly  the  revenue  more  productive. 

There  is  hardly  any  single  description  of  taxes  more 
hurtful,  especially  to  a  commercial  country,  than  taxes 
upon  the  transfer  of  property.  Commerce  and  trade 
consist  in  the  transfer  of  commodities  ;  and  in  propor- 
tion to  the  amount  and  frequency  of  these  transfers, 
trade  will  be  found  to  flourish  and  the  nation  to  improve 
in  wealth.  The  imposition  of  a  tax,  therefore,  upon 
such  transfers  would  have  the  obvious  effect  of  diminish- 
ing their  amount,  and  rendering  them  less  frequent, 
leading,  of  course,  to  a  reduction  of  trade  and  of  national 
prosperity.  Adam  Smith  says  that  one  cause  of  the  de- 
cline of  trade  in  Spain  was  the  imposition  of  taxes  of  this 
description. 

But  of  this  class  of  taxes,  the  most  injurious  is  that 
which  is  laid  upon  the  transfer  of  shares  in  joint-stock 
banks.  ■  A  landed  estate,  for  example,  is  not  transferred 
more  than  once  or  twice  in  a  lifetime  ;  shares  in  banks 
may  be  transferred  every  week,  yet  upon  each  transfer 
these  shares  must  pay  the  same  duty  as  the  law  exacts 
upon  the  transfer  of  an  estate  of  equal  value.  A  tax 
upon  bank  shares  is  a  tax  upon  productive  capital,  and 
is  as  indefensible  in  principle  as  a  tax  upon  the  transfer 
of  bales  of  cotton  or  casks  of  tallow.  It  has  been  said, 
that  if  there  were  no  tax  upon  the  transfer,  people  would 
buy  bank  shares  with  a  view  to  sell  them  again  at  a 
profit.     Do  not  people  buy  cotton,  and  tallow,  and  silk, 


144  MONEY. 

and  indigo,  and  tobacco,  and  a  thousand  other  things, 
with  the  view  of  selHng  them  again  at  a  profit  ?  Do  they 
ever  buy  things  with  a  view  to  selling  them  again  at  a 
loss  ?  If  it  be  true,  then,  that  all  purchases  are  made 
with  a  view  to  a  profitable  sale,  why  tax  the  transfer  in 
one  case  more  than  in  another  ? 

Another  objection  to  this  tax  is,  that  it  is  a  tax  upon 
the  instruments  of  improvement.  Wealth  is  a  legitimate 
subject  of  taxation,  but  to  tax  a  means  of  wealth  is  to 
strike  at  the  very  elements  of  the  national  power.  For 
instance,  what  would  be  thought  of  the  statesman  who 
should  propose  to  levy  a  tax  on  the  plough  of  the  farmer 
or  the  shuttle  of  the  weaver  ?  So  canal  companies,  and 
railway  companies,  and  dock  companies,  and  steam 
companies,  and  banking  companies  are  the  implements 
by  which  prosperity  is  produced  ;  and  to  levy  taxes 
upon  them  is  very  much  like  the  policy  of  the  man  who 
killed  the  goose  that  laid  the  golden  eggs.  Domestic 
investments  should  not  be  placed  in  less  favorable  cir- 
cumstances than  foreign  investments.  At  present, 
Dutch,  or  American,  or  even  Spanish  bonds  can  be 
transferred  one  hundred  times  a  day  in  our  market 
without  paying  any  duty  whatever,  while  the  transfers 
of  shares  in  any  of  our  own  public  companies  are  heavily 
burthened  ;  and  hence  it  is  that  large  capitalists  are  not 
to  be  found  extensively  engaged  in  these  investments. 
They  naturally  prefer  those  securities  that  can  be  real- 
ized immediately  and  without  expense.  If  the  transfers 
of  shares  in  these  companies  were  as  exempt  from 
charges  as  transfers  in  the  government  funds,  how 
many  millions,  now  invested  in  the  hazardous  bonds 
of  foreign  countries,  might  be  drawn  back  to  be  em- 


BANKING.  145 

ployed  at  home  in  stimulating  the  rewards  of  industry 
and  quickening  the  operations  of  commerce  !  Banks 
also  contribute  to  the  state  by  the  stamp  duties  paid  on 
cash  credit  bonds,  surety  bonds,  and  other  legal  instru- 
ments ;  they  also  greatly  increase  the  revenue  from  the 
stamp  duties  on  checks  and  bills  of  exchange. 

Banking,  you  will  perceive,  is  a  very  useful  agency  for 
the  great  work  of  exchanging  wealth  ;  its  two  great  instru- 
ments for  transferring  the  ownership  of  wealth  from  one 
man  to  another  are  checks  and  bills  of  exchange  ;  by  this 
means  a  smaller  number  of  coins  are  required.  Their  ob- 
ject and  aim  are  to  diminish  the  quantity  of  metallic  money 
required.  They  supply  us  with  enough  money  to  carry  on 
the  cash  business,  and  no  more,  as  all  surplus  cash  is  at  once 
returned  to  them.  As  we  progress  in  morality,  and  the 
higher  the  commercial  development,  the  more  willing  are 
the  owners  of  goods  to  part  with  them  for  checks  and 
bills.  Every  extension  of  this  principle  of  deferred 
payment,  helped  by  good  book-keeping  and  the  action 
of  such  institutions  as  the  clearing-house,  renders  less 
money  wanted  for  the  country's  commerce  ;  and  so  the 
brain  by  its  thoughtful  arrangements  provides  a  substi- 
tute for  metallic  currency.  If  every  man  had  a  banker, 
very  little  money  would  be  wanted  ;  the  nation's  pay- 
ments would  be  solely  a  matter  of  book-keeping,  of 
debiting  and  crediting  by  means  of  checks  and  bills 
of  exchange.  It  is  by  their  means  that  England,  in 
comparison  with  her  wealth  and  trade,  needs  and  uses 
less  metallic  money  than  any  other  country  in  the  world. 
If  equal  to  the  times  we  live  in,  we  shall  extend  this 
"economical  power,"  and  increase  our  note  issues  upon 
the   government    security   basis  ;    teach   our   people   to 


146  ,  MONE  V. 

understand  the  value  of  banks,  what  money  is  for — to  be 
used,  not  kept  idle  in  boxes  or  their  pockets  ;  and  ex- 
tend the  clearing-house  system  ;  for  principally  by 
these  three  means  you  may  increase  the  trade  and  com- 
merce of  the  country,  so  far  as  they  need  the  help  of  a 
medium  of  exchange,  to  any  extent.  Nothing  stops  us, 
nothing  causes  depression  of  trade,  but  our  own  igno- 
rance and  want  of  judicious  industry,  and  a  wiser  system 
of  production  and  distribution.  Gold  should  be  a  bless- 
ing to  us,  not  a  curse.  All  trade  is  an  exchange  of  gold, 
I  grant  you,  for  money  as  a  medium  ;  but,  as  Adam 
Smith  has  well  remarked,  England  (or  any  other  country) 
can  replenish  itself  with  gold  from  abroad  if  she  has  the 
wherewithal  to  pay  for  it.  Gold  is  a  commodity  to  be 
bought  with  other  articles,  like  any  other  article  ;  and  as 
all  articles  are  exchanged  for  money,  gold  can  be  had  to 
the  extent  needed  for  foreign  trade  if  the  proper  means 
are  taken  to  secure  it. 

Banking  is,  briefly,  the  economy  of  capital,  the  economy 
of  money.  Every  year  we  discover  new  forces,  or  bring 
others  under  the  control  of  man  ;  but  of  all  the  inventions 
of  which  necessity  is  the  stern  mother,  the  inventions  of 
economy  are  the  most  prominent,  as  they  are  the  most 
useful,  at  the  present  day.  To  hold  our  own,  we  must 
carefully  gather  up  what  our  forefathers  threw  away  ;  we 
must  learn  to  appreciate  what  they  neglected  or  despised. 
"  Waste  nothing,"  is  the  keynote  of  our  material  indus- 
try. Just  as  the  farmer  turns  even  the  weeds  to  account, 
as  a  manure  for  the  fields  which  they  encumbered,  so  in 
all  things  we  must  utilize  "  refuse,"  and  see  that  every 
thing  is  of  use,  if  we  take  it  to  the  right  place  and  put  it 
to    its  right  use.     We  can  only  hold    our  own    against 


EXCHANGE.  1 47 

foreign  rivals  by  learning  the  lessons  past  experience  has 
tauglit  us  ;  we  must  be  more  thoughtful,  be  more  economi- 
cal, avoid  losses  ;  try  for  making  the  many  small  gains 
instead  of  aiming  at  the  few  large  ones. 

It  is  incumbent  upon  us  to  utilize  all  the  neglected 
resources  we  possess,  and  trust,  as  the  basis  for  maintain- 
ing and  extending  our  power,  to  the  accumulative  and 
concentrated  appliances  of  a  thousand  forces  or  savings 
within  our  reach,  each  trifling  of  itself  perhaps,  but 
capable  by  wise  economy  thereof  to  promote  the  nation's 
greatness  and  wealth.  Our  people  must  learn  to  be  men 
of  business — must  learn  that  the  high  morality  of "  putting 
yourself  in  his  place  "  and  "  doing  to  another  as  you 
would  be  done  by,"  ifi  all  transactions,  is  the  height  of 
wisdom,  proved  by  experience,  as  it  is  the  only  real  proof 
of  a  nation's  religiousness,  the  consummation  of,  and 
positive  evidence  of,  a  people's  real  worship.  They  must 
learn  about  banking,  about  "money,"  about  the  bugbear 
"currency,"  as  it  is  only  by  such  knowledge  they  can 
learn  how  to  economize  the  force  of  money  ;  and  I 
maintain  that  the  knowledge  by  the  nation  how  to  cause 
this  economy  of  their  capital,  would  act  like  new  gold 
mines,  as  an  agency  to  give  to  commerce  an  expansion  it 
so  much  needs.  There  has  been  latterly  a  strong  feeling 
of  mistrust  in  the  public  mind  respecting  banks,  and  I 
have  therefore  deemed  it  advisable,  perhaps  at  too  great 
length,  to  bring  before  the  public  notice  some  of  the 
advantages  of  banking. 

EXCHANGE. 
The   exchange   trade    is   carried    on    by  a  small  and 
special  body  of  foreign  bill  brokers,  of   whom  Messrs, 


148  MONEY. 

Rothschild  are  the  greatest.  Messrs.  Rothschild  are 
immense  capitalists,  having  also  much  borrowed  money 
in  their  hands  ;  but  they  do  not  take  ;^ioo  payable  on 
demand,  and  pay  it  back  in  checks,  like  an  English- 
banker.  The  borrowed  money  which  they  have  for  use 
is  deposited  in  large  sums,  borrowed  for  terms  more  or 
less  long.  A  foreigner  thinks  "  an  exchange  business," 
— that  is,  the  buying  and  selling  bills  on  foreign  countries 
— a  main  part  of  banking.  English  bankers  deal  with  an 
aggregate  of  small  sums,  all  of  which  are  repayable 
on  short  notice,  or  on  demand. 

The  following  will  explain  briefly,  but  I  think  clearly, 
what  the  "  loss  by  exchange  "  is  ;  the  "  gain  by  ex- 
change "  will  be  the  reverse  of  this — viz.,  when  there  is  a 
*'  gain  "  instead  of  a  "  loss  ": 

A  customer  writes  us,  April  28,  1879,  t'""^*^  '"^^  ^^^  "*^^ 
been  able  to  order  for  some  time  past,  the  rate  of 
exchange  being  so  high,  and  when  he  sends  this  indent 
the  exchange  is  24I  ;  viz.,  for  every  p/^ioo  he  remits  us, 
he  has  to  pay  1,247!  rupees  instead  of  1,000,  and  the 
ordinary  cost  of  remittance.  There  is  no  mystery  in  the 
way  of  calculating  the  loss  of  exchange.  Taking  arbi- 
trary figures  for  the  purpose,  it  is  as  follows  :  To  remit 
^100  at  2s.  the  rupee,  1,000  rupees  are  required  ;  but  if 
the  rupee  is  reduced  in  value  in  India  in  relation  to  the 
value  of  silver  as  against  gold,  say  to  \s.  ^d.  the  rupee, 
1,263  rupees  are  required.  You  will  at  once  perceive  the 
difference  between  a  favorable  or  adverse  rate  of  ex- 
change, if  you  imagine  yourself  in  India  and  have  to  find 
1,263  I'lipces  instead  of  1,000  before  you  can  remit  ^100 
to  London  for  gold,  etc.  The  loss  is  represented  by  the 
excess  number  of  rupees  required  to  be  sent  home  at  the 


EXCHANGE.  1 49 

rate  of  2s.  the  rupee,  and  therefore  the  sterling  loss  is  263 
multiplied  by  2^.,  or  ^26  ds.  upon  every  ;^ioo.  The 
government  accounts  are  calculated  upon  this  principle, 
and  would  be  represented  by  a  larger  sum,  only  that  the 
loss  is  not  in  comparison  with  \s.  "jd.  against  2^.  but  of 
\s.  'jd.  against  the  average  rate  of  exchange  for  some 
years  past — viz.,  is.  \o\d.  Taking  the  whole  amount  of 
the  remittances  required  to  meet  the  home  charges  for 
1879,  and  taking  the  rupee  at  the  rate  of  i^.  ^d.  as  com- 
pared, not  with  2s.  but  with  is.  io\d.,  the  real  loss  to 
India  is  ^3,130,000  sterling.  But  as  it  was  only  pro- 
posed to  remit  15  millions,  the  real  loss  will  be  2^  mil- 
lions. Contrast  this  fearful  increase  of  expenditure 
against  the  loss  of  "  exchange  "  for  tlie  four  years  before 
the  heavy  fall  in  1876,  when  the  net  average  annual  loss 
was  ^432,000. 

From  Mr.  Bonamy  Price's  able  work,  "  Currency  and 
Banking,"  I  extract  the  following  :  "  Gold  exercises  a 
most  valuable  function  in  liquidating  the  balances  of  in- 
ternational trade.  All  trade,  as  between  individuals  so 
between  nations,  is  an  exchange  of  property,  of  wealth, 
of  goods.  Every  nation  buys  abroad  with  its  own  prod- 
ucts, its  own  goods  ;  it  has  nothing  else  to  obtain  its 
purchases  with.  When  a  country  has  mines  of  gold,  gold 
passes  as  a  product,  just  as  cotton  or  wine.  If  the  buy- 
ing equalled  the  selling  every  day,  as  would  happen  with 
direct  barter,  the  accounts  would  always  be  balanced  of 
themselves  ;  but  as  purchases  and  sales  with  one  single 
foreign  country  are  not  always  equal,  there  remains  on  a 
given  day  a  balance  to  settle,  and  that  is  done  with  an 
export  of  gold  from  the  country  which  bought  most  to 
the  country  which  has  sold  most.      At  times  this  differ- 


I  50  MONE  Y. 

ence  is  large,  as  when  a  bad  harvest  or  famine  urges  on 
immediate  and  large  purchases  of  food,  and  sufificient 
gold  at  the  moment  might  be  difficult  to  procure.  But 
the  machinery  of  modern  commerce  here  comes  in  aid  ; 
bills — which  are  only  deferred  payments — are  brought 
into  play,  and  often  before  they  are  due,  the  balance  has 
been  corrected  with  the  export  of  goods.  In  any  case, 
as  Adam  Smith  has  well  remarked,  England  can  replenish 
itself  with  gold  from  abroad,  if  she  has  the  wherewithal 
to  pay  for  it.  Trade  never  is  any  thing  else  at  last  but 
exchange  of  goods." 

International  payments  require  the  currencies  of  dif- 
ferent countries  to  be  compared  with  one  another.  Each 
country  sells  upon  prices  estimated  in  its  own  money  ; 
hence  in  international  exchanging  two  accounts  have  to 
be  settled  together,  each  expressed  in  different  moneys. 
How  is  the  position  of  each  towards  the  other  to  be 
calculated  ?  They  must  be  reduced  to  a  common  meas- 
ure, to  gold.  French  napoleons  and  francs  must  be  con- 
verted into  weights  of  gold ;  so  must  the  English 
pounds  and  shillings.  This  operation  is  carried  out  by 
expressing  the  coin  of  the  one  country  in  the  coin  of  the 
other.  The  weight  of  gold  in  an  English  sovereign  is 
compared  with  the  weight  of  the  same  metal  in  French 
francs,  calculated  on  the  basis  of  the  weight  of  gold  in 
the  twenty-franc  piece,  the  napoleon.  The  discovery  is 
made  that  twenty-five  francs,  and  some  -^Uq  more,  ex- 
press the  same  weight  of  gold  as  the  English  sovereign, 
and  this  equality  is  called  the  par  of  exchange.  When 
the  exchange  is  at  par,  a  man  who  has  an  English  sov- 
ereign can  obtain  these  francs,  and  vice  versa  these 
francs  will  get  a  sovereign.    A  bullion  dealer  who  bought 


EXCHANGE.  I5I 

two  heaps  of  sovereigns  and  napoleons  on  this  basis,  and 
melted  the  gold  into  ingots,  would  get  exactly  the  same 
ingots  from  each  heap. 

But  exchange  seldom  stands  at  par  between  two  coun- 
tries, for  a  very  sufficient  reason  ;  the  buying  and  selling 
are  seldom  equal  on  the  same  day  ;  the  difference,  as 
explained,  they  agree  shall  be  liquidated  in  gold.  Now 
to  send  gold  involves  a  charge  for  carriage  and  insurance  ; 
and  the  man  who  has  to  send  it  will  avoid  this  charge  if 
he  can  ;  so  we  find  that  goods  purchased  in  foreign 
countries,  all  except  the  small  balance  liquidated  in  gold, 
are  paid  by  the  exchange  of  debts,  by  bills.  The  Eng- 
lish debtor  pays  his  French  creditor  by  sending  him  a 
bill  due  by  a  French  debtor  for  English  goods  sent  to 
France.  Practically,  one  nation  buys  up  the  bills  on  the 
other,  and  settlements  between  the  two  countries  are 
made  by  an  exchange  of  bills.  If  the  purchases  in  the 
two  countries  are  equal,  so  will  be  the  bills  created  by 
them  ;  if  not,  the  debtor  unable  to  find  a  bill  has  to  send 
gold,  or,  as  is  generally  the  case,  he  offers  for  a  bill 
rather  more  than  its  value  in  metal  at  the  par  of  ex- 
change. If  France  owes  us  more  than  we  owe  her  at 
any  given  period,  the  French  debtor  has  to  pay,  say,  25!- 
francs  for  a  pound,  due  in  London,  rather  than  send  gold. 
If  England  owes  more  to  France  than  France  to  Eng- 
land, at  any  period,  the  English  debtor  in  London  will 
be  eager  to  obtain,  and  compete  with  others  to  buy  in 
London,  a  bill  due  by  a  Frenchman  in  France  ;  and  he 
will  give  a  sovereign  for  24I  francs  to  be  paid  in  France. 
In  the  former  case  the  exchange  is  said  to  be  in  favor  of 
England  ;  the  Englishman  gets  a  quarter  of  a  franc 
more  than  the  gold  of  his  pound  at  par.     In  the  second 


152  MONEY. 

case,  the  exchange  is  pronounced  unfavorable  ;  the 
Englishman  gets  less  gold  in  2\\  francs  than  he  gave 
away  in  his  pound.  So  you  perceive  that  a  favorable 
exchange  means  that  England  has  sold  more  than  she  has 
bought,  the  same  not  being  able  to  be  settled  by  the 
ordinary  bills,  she  has  a  balance  to  receive  in  gold.  As 
gold  is  costly  to  transmit,  what  bills  are  to  be  had  are 
sought  after,  and  fetch  more  in  consequence  ;  and  an 
unfavorable  exchange  means  the  reverse ;  she  is  the 
loser  by  the  exchange  of  bills  needed  for  the  settlement. 

But  the  exchange  will  not  rise  above  par,  beyond  the 
cost  of  carriage  and  insurance  for  the  transmission  of 
gold.  If  it  costs  half  a  franc  to  send  a  pound's  worth  of 
gold  to  England,  the  Paris  debtor  will  accept  an  ex-  • 
change  which  makes  him  give  25  J  francs  for  a  pound,  to 
be  paid  in  England  ;  but  he  will  refuse  one  of  25^,  as  it 
would  cost  him  less  to  send  the  gold. 

Another  popular  fallacy  is  that  of  favorable  exchange, 
meaning  thereby  we  have  sold  abroad  more  than  we 
bought,  and  had  to  receive  gold  for  the  balance.  The  ex- 
pression implies  an  ignorance  of  the  very  nature  of  all 
trade,  and  is  made  by  those  who  ignore  the  fact  that  men 
sell  to  have  the  power  to  buy  ;  that  all  trade  is  only  an 
exchange  of  goods,  and  the  greater  the  power  to  procure 
goods  of  foreign  countries,  for  use  and  consumption,  the 
better. 

We  only  sell  for  gold,  because  it  gives  us  a  ready 
means  to  buy  other  goods.  It  is  the  goods  we  really 
want,  not  the  money  ;  hence  the  terms,  favorable  and 
unfavorable  exchanges,  are  misleading,  but  still  exist,  in 
spite  of  their  refutation  by  Adam  Smith. 

The  delusion  is  based  upon  the  absurdity  that  to  sell 


INTEREST.  153 

is  every  thing — get  gold  for  your  goods  ;  whereas  to  sell 
without  buying  is  to  convert  a  man  into  a  Midas,  and  to 
make  him  perish  amid  piles  of  gold.  The  value  set  on 
favorable  exchanges  Mr.  Bonamy  Price  considers  the 
greatest  intellectual  and  literary  wonder  of  our  age. 

All  persons  interested  in  "  Exchange  "  should  care- 
fully read  Mr.  Bonamy  Price  on  "  Currency  and  Bank- 
ing," and  "The  Theory  of  the  Foreign  Exchanges,"  by 
the  Right  Hon.  G.  J.  Goschen. 

INTEREST. 

Interest  on  money  is  a  refined  idea,  and  not  a  uni- 
versal one.  Not  that  this  implies  that  interest  ought  not 
to  be  charged,  but  that  the  majority  of  persons  in  most 
countries  do  not  appreciate  it.  Most  savings  in  most 
countries  are  held  in  hoarded  specie.  In  Asia,  in  Africa, 
in  South  America,  they  are  thus  held,  and  it  would 
frighten  most  of  the  owners  to  let  them  out  of  their  keep- 
ing. A  modern  Englishman  assumes  as  a  first  principle 
that  he  ought  to  be  able  to  "  put  his  money  into  some- 
thing safe  that  will  yield  five  per  cent.  "  ;  but  most 
saving  persons  in  other  countries  are  afraid  to  "  put  their 
money  "  into  any  thing. 

That  part  of  the  business  of  banking  which  consists  in 
the  lending  of  money  lay,  during  the  Middle  Ages,  under 
severe  restraints.  The  taking  of  interest  for  the  loan  of 
money  was  deemed  sinful,  and  stigmatized  with  the 
name  of  usury.  This  opinion  appears  to  be  wholly  un- 
warranted, either  by  the  principle  of  natural  equity  or 
the  enactments  of  the  Mosaic  law.  "  The  taking  of 
interest  from  Israelites  was  forbidden  by  Moses  ;  not, 
however,  as  if  he  absolutely  and  in  all  cases  condemned 


1 54  MONE  Y. 

the  practice,  for  he  expressly  permitted  interest  to  be 
taken  from  strangers,  but  out  of  favor  to  the  poorer 
classes  of  people.  The  further  we  go  back  towards  the 
origin  of  nations,  the  poorer  do  we  commonly  find  them, 
and  the  more  strangers  to  commerce  ;  and  where  this  is 
the  case,  people  borrow,  not  with  a  view  to  profit,  but 
from  poverty,  and  in  order  to  procure  the  necessaries  of 
life  ;  and  then  it  must  be,  no  doubt,  a  great  hardship  to 
give  back  more  than  has  been  got.  The  taking  of 
interest  from  strangers  Moses  has  not  only  nowhere 
forbidden,  but  even  expressly  authorized.  Hence  it  is 
clear  that  he  does  by  no  means  represent  interest 
as  in  itself  sinful  and  unjust.  Political  economy 
demonstrates  clearly  that  "  thrift,"  or  the  accumula- 
tion of  capital  by  a  nation,  depends  on  what  profit  can 
be  obtained  by  self-denial,  the  reward  of  abstinence." 
In  "  Paper  Money,"  Mr.  Harvey  denies  that  capital  is 
the  result  of  saving,  and  says  the  absurdity  of  stating 
that  the  only  way  of  adding  to  the  capital  of  a  country 
is  to  save  money,  arises  from  our  confounding  capital 
and  money.  According  to  his  theory,  "  the  problem  of 
life  is  to  consume  much  and  produce  much."  With  this 
1  cordially  agree — no  one  is  more  anxious  that  the  mass 
of  the  people  should  have  more  of  the  comforts  of  life  ; 
but  to  obtain  this,  they  must  not  be  misled  by  those 
"false  friends"  who  tell  them  to  limit  the  produce  of 
their  labor,  but  be  guided  by  their  "  true  friends,"  who 
advise  them  to  produce  all  in  their  power.  Mr.  Harvey 
agrees  with  Mr.  Ruskin,  that  thrifty  people,  accumulators 
of  capital,  are  "  worshippers  of  Mammon,  and  servants 
of  the  devil."  If  you  have  read  my  books,  you  will  have 
noticed  my  contempt  for  the  accumulator,  who  is  actuated 


INTEREST.  155 

solely  by  his  love  of  gold — whose  pleasure  is  in  the 
thought  of  his  possessions,  which  yield  gratification  to 
his  miserly  soul  ;  but  we  must  not  ignore  the  fact,  that 
the  wages  for  next  week,  or  month,  or  year,  depend 
solely  on  the  savings  of  the  week,  month,  or  year  that 
preceded  ;  that  the  very  existence  of  society  now  depends 
upon  those  who  "  think  of  the  morrow,"  upon  those 
whose  "savings"  of  to-day  are  the  "seed"  for  to- 
morrow ;  and  that  capital,  if  not  money,  represents  in 
loans,  debts,  or  i)roduce  a  right  to  money,  a  right  to  have 
when  wanted  an  equivalent  for  what  it  abstained  from 
using  and  lent  to  others.  Capital  is  a  "  deferred  pay- 
ment," a  debt  payable  on  demand,  and  until  demanded, 
is  entitled  to  interest,  in  proportion  to  the  risk  incurred 
in  lending  it.  Any  such  prohibition  of  interest  in  our 
age  and  country  would,  without  doubt,  be  unjust  towards 
lenders  and  destructive  to  trade  of  every  description. 
Among  all  the  remnants  of  ancient  laws  it  would  be  dif- 
ficult to  find  one  which,  in  the  present  state  of  society, 
it  would  be  more  foolish  and  hurtful  to  revive  and  en- 
force. It  could  only  suit  a  state  so  constituted  as  was 
that  of  the  Israelites  by  Moses.  The  taking  of  interest 
for  the  loan  of  money  was  first  prohibited  in  England  by 
Edward  the  Confessor.  This  law,  however,  appears  to 
have  become  obsolete  ;  for,  in  a  council  held  at  West- 
minster in  the  year  11 26,  usury  was  prohibited  only  to 
the  clergy,  who,  in  case  they  practised  it,  were  to  be  de- 
graded ;  and  in  another  council,  held  twelve  years  after- 
wards, it  was  decreed,  "  that  such  of  the  clergy  as  were 
usurers  and  hunters  after  sordid  gain,  and  for  the  public 
employment  of  the  laity,  ought  to  be  degraded."  The 
earliest  mention  we  find  in   English  history  of  a  certain 


156  MONEY. 

yearly  allowance  for  the  usury  or  interest  of  money  is  in 
the  year  1199,  the  tenth  and  last  year  of  Richard  I.  In 
this  case  the  rate  of  interest  was  10  per  cent.  This  ap- 
pears to  have  been  the  ordinary  or  market  rate  of  interest 
from  that  period  until  the  time  of  Henry  VIII.  ;  but 
there  are  many  instances  on  record  of  a  much  higher 
rate  of  interest  being  taken,  especially  by  the  Jews  and 
the  Lombards,  who  in  those  times  were  the  principal 
money-lenders.  The  exorbitant  interest  taken  by  them 
is  supposed  by  eminent  writers  to  have  been  the  cause  of 
the  prohibition  of  usury. 

In  the  year  1546,  the  taking  of  interest  for  money  was 
made  legal  in  England,  and  the  rate  was  fixed  at  10  per 
cent.  This  act  was  repealed  in  the  year  1552,  but  it  was 
re-enacted  in  187 1.  The  legal  rate  of  interest  was  re- 
duced to  8  per  cent,  in  1624,  and  to  6  per  cent,  in  1651. 
In  the  year  17 14  it  was  reduced  to  5  per  cent.,  where  it 
now  remains.  The  legal  rate  of  interest  is  still  6  per 
cent,  in  Ireland. 

After  the  taking  of  interest  was  sanctioned  by  law,  the 
term  usury,  which  was  previously  applied  to  interest  in 
general,  became  limited  to  denote  a  rate  of  interest 
higher  than  that  which  the  law  allowed.  Mr.  Gilbart 
says  :  "  Erroneous  views  are  often  entertained  of  the 
Mosaic  laws,  from  neglecting  to  consider  the  state  of  the 
people  to  whom  these  laws  were  given.  It  was  the  ob- 
ject of  the  Jewish  legislature  to  make  the  Jews  a  purely 
agricultural  people.  The  promotion  of  agriculture  was, 
as  Montesquieu  would  say,  the  ^/z>// of  his  laws.  Hence 
he  prohibited  the  taking  of  interest  for  the  loan  of  money. 
By  this  means  he  interdicted  commerce.  His  design 
was  to  prevent  the  Israelites  from  associating  with  the 


INTEREST.  157 

surrounding  nations,  and  learning  their  idolatrous  prac- 
tices. But  even  Moses  permitted  the  Jews  to  take 
interest  for  the  money  lent  to  strangers — a  circumstance 
which  proves  that  the  prohibition  was  only  a  political  and 
not  a  moral  precept.  If  the  taking  of  interest  for  money 
were  really  wrong,  it  would  have  been  forbidden  in 
all  cases.  But  in  the  Middle  Ages  the  political 
and  the  moral  laws  of  Moses  were  confounded  to- 
gether, and  all  of  them  were  supposed  to  be  of 
perpetual  obligation  upon  all  nations.  These  opin- 
ions, which  might  have  been  useful  in  a  purely 
agricultural  state,  were  still  indulged  when  a  change  of 
manners  required  that  this  country  should  become  com- 
mercial. If  we  admitted  the  unlawfulness  of  taking 
interest  for  money,  we  might  on  the  same  principle  con- 
demn all  kinds  of  commerce,  and  even  all  profitable 
investment  of  capital.  Where  is  the  difference  between 
taking  money  for  the  use  of  money  and  taking  money 
for  the  use  of  commodities  that  are  purchased  with 
money  ?  If  I  lay  out  ;^ioo  in  the  purchase  of  a  house, 
I  am  allowed  to  take  rent  for  the  use  of  that  house. 
Why,  then,  if  I  lend  to  a  friend  the  ^100  with  which  he 
purchases  a  house,  am  I  to  receive  no  remuneration  ?  If 
we  are  not  allowed  to  receive  any  money  for  the  loan  of 
money,  why  are  we  alk)wed  to  receive  money  for  the 
loan  of  a  house  or  coach,  or  any  other  article  ?  An  ex- 
orbitant charge  for  interest  is  certainly  unjust,  but  so  is 
an  exorbitant  charge  for  any  thing  else.  Money  is  a 
necessity.  A  merchant  having  bills  to  meet  must  find  it 
somewhere,  at  some  price.  It  is  this  urgent  need  of  the 
whole  body  of  merchants  which  runs  up  the  value  of 
money  so  wildly  in  a  great  panic.     On  the  other  hand, 


158  MONEY. 

money  easily  becomes  a  "  drug,"  and  there  is  soon  too 
much  of  it,  and  we  are  told  in  the  money  articles  daily 
that  "  bills  "  are  not  to  be  had,  and  then  the  value  of 
money  is  very  low.  These  fluctuations  are  caused  by  a 
slight  excess  of,  or  a  slight  deficiency  of,  quantity  ;  but 
the  rate  of  interest  depends  upon  supply  and  demand. 
When  the  supply  is  thought  to  be  inadequate  for  the 
demand,  all  are  eager  to  secure  it,  and  the  moneyed 
interest  naturally  charge  a  higher  rate  for  the  use  of  it. 
I  do  not  believe  in  a  scarcity  of  money  ;  it  is  the  panic 
that  gets  into  the  minds  of  men  at  certain  epochs, 
destroying  all  confidence  of  man  in  man  ;  when  the 
most  wealthy  houses  become  subject  to  suspicion,  and 
the  best  of  our  banks  know  not  how  soon  they  may 
become  exposed  to  a  run  from  the  popular  delusion 
which  prevails.  Hence  money  is  hoarded,  every  one 
prepares  for  the  worst,  and  money  becomes,  or  is  said  to 
be,  scarce,  simply  because  no  one  will  part  with  what  he 
has.  Take  the  panic  of  1847  :  the  Act  of  1844  was  no 
sooner  suspended  in  October,  1847,  people  were  no 
sooner  told  the  bank  was  not  to  be  restricted  in  its  issue 
of  bank  notes,  than  the  pressure  immediately  6eased. 
On  the  return  of  confidence  the  hoards  were  brought 
out  ;  the  amounts  held  in  reserve  by  bankers  in  England 
and  Ireland  can  be  reduced  ;  the  stagnant  funds,  the 
locked-up  capital,  are  again  put  mto  circulation  ;  money 
is  vitalized,  and  soon  overflows  the  country. 

The  following  list  of  the  bank  rate  of  discount  for 
three  years  will  prove  that  money  is  not  paid  too  highly  for : 
From  June  19,  1884,  to  August,  1887,  the  rate  has  only 
twice  been  5  per  cent.,  five  times  4  per  cent.,  more  than 
half  the  time  not  over  2\  per  cent.,  one  year  out  of  the 
three  only  2  per  cent. 


INTEREST.  1 59 

FLUCTUATIONS  IN  THE  BANK  RATE  OF  DISCOUNT  DURING  1884-5-6-7. 


1884-5. 

1886. 

1887, 

Date. 

Rate. 

Date. 

Rate. 

Date. 

Rate. 

19th  June  

9th  October. .  . . 
30th  October. . . 
6th  November. 
29th  Jan.,  1885. 
19th  March.  .  .  . 

7th  May 

14th  May 

1 2th  November. 
17th  December. 

2 

3 

4 

5 

4 

3i 

3 

2i 

3 
4 

2 1  St  January.  . . 
1 8th   February. 

6th  May 

loth  June 

26th  August .  . . 
2 1  St  October.  .  . 
i6th  December. 

3 
2 

3 

4 

5 

3d  Febniary. . . 
loth  March. . . . 
24th  March. . . . 

14th  April 

28th  April 

4th  August. . . . 

4 

3i 

3 

3 
2 

End  of  1886,  money  was  scarce,  and  more  had  to  be 
paid  f(5r  it,  but  since  March  the  moneyed  class  have  had 
to  suffer.  Cheap  money  is  very  useful  in  developing 
many  industries  that  cannot  afford  to  pay  high  interest  ; 
but  money  is  cheap  generally,  because  goods  are  not 
being  produced  from  a  lack  of  enterprise,  a  falling  off  in 
production,  or  a  depreciation  in  their  value.  Trade 
generally  has  not  recovered  the  depression  of  1877-78. 
We  want  new  markets,  and  more  attention  given  to  what 
is  required  by  the  old  ones.  Our  manufacturers  and 
merchants  do  not  pay  sufficient  attention  to  the  wants  of 
the  large  population  growing  up  all  over  the  world. 
There  can  be  no  surer  indication  of  the  "  home  trade  " 
than  the  clearing-house  returns,  as  these  are  the  total 
settlements  day  by  day  between  buyers  and  sellers.  The 
four  weeks  of  July,  1887,  as  against  1886,  show  an 
improvement : 


l6o  MONEY. 


CLEARING    HOUSE    RETURNS. 

iS86.  1887. 


Week  ended  July  7,;^  132,389,000 

"   14.       94.675,000 

"        "  21,     134,221,000 

"         "        "  28,       81,545,000 


Total  July,  i886,;^442, 830,000 
Increase  in  1887         15,669,000 


Week  ended  July  6,;^  136,662,000 

"  "       "   13,     100,940,000 

"       "  20,     136,351,000 

"  27,       84,546,000 


;^458,499>ooo 


;^458,499,ooo 

Ask  any  tradesman  Avhy  business  is  so  dull,  you  have 
the  stereotyped  reply,  "  Scarcity  of  money  "  ;  yet  money 
is  waiting  to  be  asked  for,  if  they  had  the  debts  repre- 
sented by  bills  to  give  in  exchange  for  it.  This  is 
caused  mainly  by  a  want  of  confidence,  stopping  produc- 
tion, distribution.  Yet  why  this  feeling  of  mistrust  it 
would  be  hard  to  tell  ;  except  that  men  do  not 
think  for  themselves,  do  not  act  for  themselves,  but 
have  trusted  to  bankers  and  others  to  invest  for 
them  ;  and  one  gigantic  failure  shakes  confidence 
in  all,  and  so  the  public,  the  money-investing  pub- 
lic, keep  to  first-class  securities  only  ;  and  on  the  13th 
of  May,  1887,  consols  reached  103^,  the  highest  price  ; 
the  lowest  was  47^  in  August,  1798.  There  could  be  no 
safer  indication  that  capitalists  are  at  their  wits'  end  to 
know  what  to  do  with  their  money.  The  discount  rate 
for  three  months'  bank  bills  is  nominally  2  per  cent.,  too 
little  for  borrowers  to  pay,  or  lenders  to  receive  ;  but 
practically  the  rate  may  be  put  at  \\  per  cent.,  owing  to 
the  competition  among  lenders  ;  whilst  the  London  dis- 
count houses  are  obliged  to  refuse  large  sums  of  money 
offered  to  them  on  deposit  from  the  provinces  on  account 
of  the  impossibility  of  making  use  of  it  profitably.  The 
quantity  of  money  required  in  any  country  must  depend 


INTEREST.  l6l 

upon  the  extent  of  its  trade  ;  and  as  both  the  foreign  and 
domestic  trade  of  this  country  has  very  considerably 
decreased  the  last  few  years,  and  still  keeps  in  a  very 
depressed  state,  less  money  is  required  to  carry  it  on. 
Manufacturers  and  merchants  have  not  the  same  quan- 
tity of  bills  to  offer  for  discount  ;  hence  there  is  a  great 
falling  off  in  'the  demand  for  money.  The  quantity 
of  money  required  to  carry  on  any  given  amount  of  trade 
depends  also  upon  the  general  scale  of  prices  ;  and  as 
the  prices  of  nearly  all  commodities  have  been  much 
reduced,  the  amount  of  money  required  for  the  exchange 
of  the  same  quantities  of  commodities  is  proportionately 
diminished.  So  lenders  cannot  find  legitimate  borrow- 
ers, capital  is  in  search  of  employment,  and  has  to  be 
satisfied  with  very  poor  remuneration.  It  is  not  want  of 
money,  then,  that  causes  the  present  depression  to  last — 
there  is  abundance  of  money  ;  yet  some  of  our  most 
important  branches  of  manufacture  are  in  a  state  of  great 
depression.  At  the  March  wool  sales,  180,000  bales  out 
of  240,000,  or  "  three  fourths,"  were  bought  by  foreign- 
ers, the  home  trade  only  requiring  "  one  fourth,"  instead 
of  "  one  half."  The  third  series  of  sales  closed  Septem- 
ber 26th,  and,  as  in  the  preceding  series,  the  foreign 
trade  took  a  large  proportion  of  the  supply — 175,000 
bales  out  of  325,628  ;  or,  out  of  899,400  bales  sold  in  the 
three  series  for  1879,  598,300  bales  were  bought  for  the 
foreign  trade,  and  only  301,100  for  the  home  trade  ; 
whereas  in  the  corresponding  three  series  of  1878, 
442,200  were  bought  for  export,  and  384,900  for  home 
consumption  :  a  great  falling  off  in  one  of  our  staple 
productions,  and  a  great  increase  in  foreign  productions. 
How    is    this  ?     There    are    various   causes,    and    our 


1 62  MONEY. 

working  classes  have  yet  to  learn  that  it  is  a  very  easy 
task  to  bleed  a  man  to  death,  but  even  with  a  profuse 
supply  of  money  to  put  fresh  blood  into  his  veins,  we 
cannot  at  our  pleasure  restore  him  to  life  again. 

What  an  outcry  there  is  when  money  gets  over  5  per 
cent.,  or  even  before  it  reaches  that  rate  ;  yet  manufac- 
turers and  merchants  might  well  afford  the  capitalist  his 
temporary  gleam  of  sunshine  without  so  much  murmur- 
ing. The  rule  with  manufacturers  is  to  draw  on  their 
customers  at  four  months  if  they  are  not  able  to  take  the 
discount  ;  so  that  even  now,  when  they  can  take  the  bills 
to  the  bank  and  get  the  same  discounted  from  i^  to  2^, 
they  still  charge  their  customers  7J  per  annum.  The 
City  merchant  houses,  like  Cook  &  Son,  Moore,  Cramp- 
ton,  &  Co.,  make  a  large  profit  by  the  necessities  of 
their  customers  ;  or,  putting  it  another  way,  they  lend  to 
their  customer  ;  that  is,  they  extend  the  length  of  credit 
four  months  by  his  sacrificing  2\  per  cent,  discount. 
There  are  some  houses  who  will  only  draw  at  three 
months.  When  I  first  began  business,  I  bought 
largely  of  one,  a  very  respectable  house  that 
served  me  well,  but  the  counting-house  profit  of 
ten  per  cent,  was  a  serious  drawback.  A  busi- 
ness man  of  course  always  discounts  such  accounts 
if  possible,  and  arranges  that  the  house  that  draws  at  four 
months  shall  do  so  ;  but  the  profit  monthly  in  discount- 
ing a  batch  of  bills  at  the  bank  rate,  in  comparison  with 
the  discount  their  customers  have  to  forego,  must  be  a 
large  sum.  A  tradesman  should  always  try  and  arrange 
his  purchases  so  as  to  secure  the  discount  ;  to  do  with 
good  men  or  to  do  a  cash  trade,  taking  the  discount  is 
essential.     As   a  rule,  it   is  not   advisable   to    draw    on 


INTEREST.  163 

houses  that  sell  all  for  cash  ;  if  a  debtor's  assets  consist 
only  of  his  stock  in  trade,  that  alone  will  never  pay  his 
creditors  20s.  in  the^^,  if  he  takes  the  full  time  allowed 
in    the    trade.       For  instance,    the    terms    at   least    are 
one  clear  month  and  four  months'  bill  ;    then   there  is 
dating  on — say  six  months'  credit  or  half  a  year's  trade. 
To  pay,  the  stock  must  be  turned  over  four  times  a  year, 
or  at  least  three  times.     You  will  perceive  that  there  is 
only  three  or  four  months'  stock  to  pay  six  months'  pur- 
chases with.     Yet  merchants  will  not  keep   their  eyes 
open,  will  not  read  the  signs  of  the  times,  will  not  see 
that  book  debts  will  year  by  year  be  less  of  an  asset  as 
cash  trade  becomes  more  and  more  the  rule.     Despite,  I 
say,  of  this,  our  leading  City  houses  tsmpt  their  cus- 
tomers to  buy  by  offering  job  lots,   all   under  market 
prices,  they  say,  dated  as  June,  if  bought  March   25th, 
26th,   27th  ;  and   the    same    house  issued   a  circular   in 
reference  to  an  article  that  had  advanced  in  price,  offering 
to  book  orders  at  prices  quoted,  for  delivery  September 
ist  as  December,  November  ist  as  February,  December 
I  St  as  March.     Can  recklessness  go  further,  or  can  we 
be  surprised  if  such  a  policy  caused  this  house  to  draw 
largely  on  their  reserve  fund  to  pay  five  per  cent,  interest 
on  capital  ?     Another  sent  out  twelve  sheets  of  job  lots 
in  March,  with  the  temptation  also  of  June  ;  and  so  in- 
fectious has  become  this  fatal  disease,  that  another  house, 
whose  system  was  unique,  whose  counting-house  policy 
was  the  most  profitable  as  the  most  judicious  in  the  City, 
whose  rule  used  to  be  that  if  a  parcel  was  bought  on  the 
last  day  of  the  month,  it  was  charged  for  in  that  month's 
account  if  it  left  the  premises,  yet  on  March  29th,  1879, 
this  house,  to  my  great  sorrow,  so  far  departed  from  the 


164  MONE  y. 

principle  of  its  great  founder,  as  to  send  out  a  circular 
offering  goods  under  price,  and  to  be  dated  as  May.  I 
know  the  excuse  :  trade  is  bad,  others  do  this  and  that. 
Buyers  grumble  that  the  dating  on  will  tempt  men,  aye, 
even  more  than  price.  All  too  true.  Still  the  principles 
that  have  made  a  house,  that  have  triumphed  successfully 
over  periods  as  adverse  as  the  present,  ought  not  to  be 
departed  from  except  as  a  last  resource.  Look  at  the 
damage  it  does  the  house  !  A  besieged  castle  has  little 
chance  against  the  enemy  when  it  is  known  how  nearly 
exhausted  the  supplies  are  ;  and  once  begun,  and  you 
join  in  this  dangerous  system  of  dating  on,  there  is  no 
knowing  where  you  may  go. 

"  Within  the  infant  rind  of  this  small  flower, 
Poison  hath  residence,  and  medicine  power. 
Two  such  opposed  kings  encamp  there  still 
In  man  as  well  as  herbs — grace  and  rude  will, 
And  when  the  worser  is  predominant, 
Full  soon  the  canker,  death,  eateth  up  that  plant." 

Shakespeare. 

Beginning  life  with  a  very  small  amount  of  borrowed 
capital,  I  am  well  aware  of  the  value  of  dating  on  ;  but 
at  that  time  we  sold  our  own  goods  on  credit — credit 
was  the  rule  and  ready  money  the  exception — and  the 
dating  on  was  only  the  two  seasons'  parcels  bought 
some  months  in  advance  of  the  time  they  would  be 
required.  The  "  canker  "  in  the  present  system  is  dating 
on  by  circular  indiscriminately  to  every  one,  and  after 
having  sold  the  season's  parcel  dated  as  February  to 
your  regular  customers,  offering  "job  lines"  to  those 
who  have  not  already  bought  in  March  dated  as  June. 
The  judicious  use  of  the  system  is  the  "  medicine  "  ;  the 


INTEREST.  165 

reckless  use  of  the  system  is  the  "poison,"  in  tempting  a 
man  in  March  to  buy  "jobs  "  dated  as  June,  before  you 
know  if  he  intends  to  pay  in  April  for  the  season's  parcel 
bought  in  February  ;  tempting  men  to  incur  liabilities  ; 
making  of  business  a  reckless,  haphazard  kind  of  thing  ; 
the  counting-house,  instead  of,  as  formerly,  being  the 
safety  valve,  the  drug  luring  men  on  to  their  destruction. 
Why  is  this  ?  Because  men  do  not  think,  and  are  led 
away  by  specious  expedients,  and  do  not  take  the  trouble 
to  get  at  the  bottom  of  things.  A  business  man  of 
course  takes  advantage  of  the  liberal  terms.  Time  is 
money,  and  if  a  house  volunteers  an  extra  month  or 
two,  he  is  willing  to  take  it.  As  a  rule,  they  allow  you 
half  per  cent,  extra  per  month  for  prepayment  ;  so  buy 
upon  their  terms  if  you  want  to  buy,  and  if  the  price  is 
right,  and  prepay  them.  But  the  tendency  of  the  time  is 
for  the  consumer  to  pay  "cash,"  and  get  the  best  value 
possible  for  ready  money  ;  and  to  help  their  customers, 
it  would  be  wiser  to  "  shorten  credit,"  and  charge  a 
lower  price  for  the  quicker  turnover  and  lessened  risk. 
Goods  cannot  be  sold  cheaply,  as  they  should  be,  to 
"  cash  "  buyers  whilst  our  system  is  one  of  reckless, 
foolish,  indiscriminate  "  long  credit." 

They  justify  the  practice  by  saying  trade  is  in  a  very 
depressed  state.  No  doubt  it  is,  and  unless  great  caution 
is  observed,  the  excessive  glut  of  idle  capital  will  lead  to 
a  deal  of  unsound  speculative  business.  It  may  be  diffi- 
cult to  do  so,  it  is  very  unpleasant  to  have  to  do  so,  but 
it  would  be  wiser  to  keep  the  goods,  as  it  will  be  wiser  to 
keep  the  money  till  it  can  be  legitimately  used,  than  lend 
it  rashly  rather  than  not  lend  it  at  all.  It  is  a  calamity 
for  the  moneyed  interest  when  the  nation  groans  under 


l66  MONEY. 

the  pressure  of  an  abundance  of  money-lenders  not  able 
to  find  borrowers  ;  capital  in  search  of  employment,  and 
not  able  to  find  it.  Trade  being  generally  depressed,  the 
cause  cannot  be  for  want  of  money  ;  and  the  capitalist 
must  have  patience,  and  wait  till  the  cause  of  the  de- 
pression be  removed.  It  should  be  a  proof  that  the 
quantity  of  money  does  not  of  itself  give  the  stimulus  to 
domestic  industry.  Trade  may  be  paralyzed  when  in 
full  operation  because  money  cannot  be  had,  but  money 
alone  cannot  set  the  wheels  in  motion.  There  was 
nothing  to  justify  the  difficulty  in  getting  money  during 
the  last  pressure.  I  have  witnessed  those  of  1847,  1857, 
1866,  but  the  1877,  1878  collapse  seemed  to  make  our 
bankers  lose  their  nerve.  What  manufacturer  or  mer- 
chant feels  disposed  to  launch  out  upon  such  an  insecure 
sea  as  our  currency,  with  their  bankers  acting  in  a  cer- 
tain manner  up  to  the  last  moment,  and  in  the  hour  of 
need,  without  the  least  warning,  to  object  on  some  puerile 
objection,  and  return  your  paper  ?  Why,  inevitably, 
every  prudent,  sensible  man  resolves  to  curtail  his  opera- 
tions, and  not  risk  his  position  upon  such  an  insecure 
basis.  As  before  stated,  I  see  no  reason,  if  the  bank 
act  was  altered  to  meet  the  requirements  of  1881,  why 
the  bank  rate  should  be  at  any  time  over  six  per  cent. 
And  I  have  also  stated  that  even  our  present  panic  rates 
are  nothing  to  any  solvent  man  doing  a  legitimate  busi- 
ness. This  has  always  been  my  opinion,  and  I  have 
simply  regarded  them  as  a  little  off  my  year's  profit,  and 
a  little  more  in  the  banker's  or  money-lender's.  We 
must  all  have  our  innings  ;  but  what  we  object  to  is  that 
that  there  should  be  any  difficulty  in  getting  money 
when  wanted,  and,  after  being  refused,  is  lent.     Then 


INTEREST.  167 

you  open  up  a  new  aspect  of  the  case,  that  crushes  by  its 
uncertainty  the  actions  of  the  man,  and  all  operations  are 
necessarily  for  a  time  curtailed.  This  is  the  real  evil  of 
all  panics  ;  the  depriving  of  solvent  houses  of  the  means 
of  meeting  their  legitimate  engagements.  Banking  ought 
to  be  done  upon  a  certain  system  ;  bills  of  regular  cus- 
tomers that  are  taken  for  certain  sums  or  at  certain  dates 
ought  not  to  be  objected  to  at  a  time  of  pressure,  when 
the  market  is  not  open  to  the  customer.  Six  months' 
bills  are  right  or  wrong  ;  if  right,  they  should  be  taken  at 
one  time  as  at  another  ;  if  wrong,  they  should  not  be 
taken  at  any  time,  no  matter  how  plentiful  money  may 
be.  If  there  be  any  deviation,  it  should  be  in  being 
more  liberal  at  the  difficult  time  to  the  regular  customer, 
unless  his  credit  is  unsatisfactory,  or  the  amount  of  bills 
under  discount  much  larger  than  usual.  Bankers,  of  all 
men,  should  be  superior  to  nerveless  fear,  as  by  such  ac- 
tions wealthy  men  may  be  ruined.  Manufacturers  de- 
prived of  the  means  of  executing  their  orders,  thousands 
thrown  out  of  employment,  the  national  industry  para- 
lyzed, the  i)rogress  of  useful  works  stopped,  through 
want  of  confidence,  and  the  usual  facilities  of  getting 
money  stopped — such  are  the  effects  of  pressure  in  the 
money  market.  The  high  rate  is  a  mere  bagatelle  ;  the 
stoppage  of  a  man's  credit,  the  limiting  and  restricting 
his  loan  account,  or  refusing  to  discount  this  or  that 
paper,  being  the  real  evil  that  causes  an  immediate 
paralysis  of  trade.  Bankers,  as  a  rule,  are  too  liberal  ; 
their  great  fault  is  that,  like  an  indulgent  father,  they 
suddenly,  without  cause  or  reason,  refuse  the  helping 
hand  they  have  heretofore  so  liberally  given.  Times  of 
pressure,  of  course,  are  very  trying  to  bankers,  and  flue- 


1 68  MONEY. 

tuations  in  the  value  of  money  generally  injurious. 
When  money  is  abundant  they  get  the  minimum  of  profit, 
and  are  tempted  to  make  imprudent  investments,  in 
order  to  employ  their  funds  ;  and  when  money  is  scarce 
the  rate  of  interest  on  deposits  is  advanced,  and  although 
they  get  the  advantages  on  the  balances  of  the  current 
accounts  and  their  own  capital  of  the  higher  rate  of 
interest,  on  the  other  hand  they  have  to  keep  a  larger 
sum  unemployed  in  the  till  ready  in  case  of  a  rush,  and 
there  is  more  danger  from  losses  by  the  failing  of  cus- 
tomers, or  from  the  necessity  of  realizing  the  securities 
they  hold.  As  a  rule,  the  extremes  of  abundance  and 
scarcity  of  money  are  unfavorable  to  banking  profits.  A 
state  in  which  money  is  easy  without  being  abundant, 
and  valuable  without  being  scarce,  is  the  most  conducive 
to  the  prosperity  of  both  the  banking  and  the  commer- 
cial interests  of  the  country. 

WEALTH. 

"  Wealth  in  the  gross  is  death,  but  life  diffused  ; 
As  poison  heals,  in  just  proportions  used  : 
In  heap,  like  ambergris,  a  stink  it  lies, 
But,  well  dispersed,  is  incense  to  the  skies." — Pope. 

Mr.  R.  H.  Patterson,  writing  upon  the  "  Eastern 
Trade  and  Precious  Metals,"  in  the  Conte?nporary  Re- 
view for  April,  1879,  says  :  "  According  to  Mr.  Jacob's 
estimate,  the  entire  amount  of  specie  in  Europe  in  1492 
was  only  ^33,000,000  ;  and  the  comparative  dearth  or 
scarcity  of  money  is  shown  by  the  fact  that  the  precious 
metals  were  at  that  time  three  times  dearer  ;  that  is  to 
say,  their  exchangeable  value  or  purchasing  power  was 
three   times    as   great  as  it   had  been   in  the    reign   of 


WEALTH.  169 

Augustus.  But  in  the  course  of  a  century,  after  the  dis- 
covery of  America  (a.d.  1490-1600),  the  stock  of  gold 
and  silver  existing  in  Europe  (after  deducting  loss  by 
wear  and  by  export)  became  quadrupled,  and  in  a.d. 
1640  it  became  nearly  sevenfold  larger  than  it  was  in  the 
days  of  Columbus.  The  result  was  that  prices  became 
nearly  quadrupled  ;  that  is  to  say,  specie  or  money  fell  to 
only  about  a  fourth  part  of  its  old  value.  Produce 
increasing  out  of  proportion  to  money,  more  has  to  be 
given  in  exchange  for  that  money  ;  the  produce  fnust  be 
exchanged,  money  having  a  fixed  legal  value  put  upon 
it  ;  goods  being  in  excess,  go  down  in  price  ;  the  same 
amount  of  money  will  buy  a  larger  quantity  of  produce. 
But  the  positions  being  reversed — gold  being  discovered 
faster  than  goods  can  be  manufactured,  and  the  holder 
of  the  gold  wanting  produce  and  not  the  gold,  they  have 
to  part  with  more  of  the  gold  to  get  a  share  of  the  exist- 
ing produce  ;  so  people  get  more  money  in  exchange  for 
their  goods.  But  the  flood  of  gold  and  silver  causes  a 
demand  for  goods  ;  and  heavy  as  was  the  fall  in  the 
value  of  gold  and  silver  which  followed  the  inundation  of 
the  precious  metals  from  America  in  the  sixteenth  cen- 
tury and  onward,  the  fall  was  not  proportionate  with  the 
multiplication  of  the  stock  of  these  metals  in  Europe  ; 
prices  being  quadrupled,  while  the  gold  and  silver  became 
seven-fold.  There  is  but  one  possible  explanation — 
money  stimulates  trade,  demand  causes  supply  ;  the 
great  expansion  of  commerce  caused  the  demand  or  re- 
quirement for  specie  to  simultaneously  increase  since 
1492.  The  miners  wanted  goods,  clothing,  etc.;  ships 
and  sailors  were  needed  to  send  the  goods  abroad  to 
them  ;  new  branches  of  commerce  sprang  up  ;  and  the 


I/O  MONEY. 

increased  import  of  commodities  led  to  the  export  of  gold 
and  silver.  In  1492  the  stock  of  gold  existing  in  Europe, 
we  are  told,  was  only  ;^33,ooo,ooo,  and  the  produce  of 
the  European  mines,  then  the  only  source  of  supply,  was 
under  ;^i5o,ooo  a  year.  During  the  first  half  of  the 
sixteenth  century  the  Eastern  trade  was  hardly  in  exist- 
ence ;  but  by  the  end  of  the  century,  however  (in  1600) 
the  export  of  the  precious  metals  to  the  East,  in  connec- 
tion with  the  new  trade  had  amounted  (according  to  Mr. 
Jacob)  in  the  aggregate  to  ^14,000,000  sterling — a  sum 
which,  according  to  the  same  authority,  was  somewhat 
larger  than  the  aggregate  produce  of  the  European  mines 
during  the  same  period  (viz.,  1492-1600).  Thus,  at  its 
very  outset,  the  Eastern  trade  was  manifestly  dependent 
upon  a  new  supply  of  the  precious  metals,  and,  but  for 
the  conquest  of  Mexico  (1516)  and  Peru  (1520),  and  the 
discovery  in  1546  of  the  great  silver  mountain  of  Potosi 
by  the  Spaniards,  which  caused  a  large  and  permanent 
supply  of  specie  from  the  New  World,  the  Eastern  trade 
could  not  have  been  prosecuted  at  all. 

'*  Europe  had  obtained  almost  its  entire  stock  of  gold 
and  silver  from  the  East.  The  East  was  proverbially  the 
prolific  seat  both  of  gems  and  the  precious  metals.  Yet 
for  three  centuries  or  more,  ever  since  civilization  began 
to  revive  in  Europe,  there  has  been  a  steady  flow  of  the 
precious  metals  to  the  East.  In  the  course  of  the  next 
century  (1601-1700)  the  aggregate  export  of  the  precious 
metals  to  the  East  amounted  to  t^-},  millions — a  sum  equal 
to  the  entire  stock  of  gold  and  silver  in  Europe  in  1492. 
The  establishment  of  the  Dutch  and  the  English  East 
India  companies  gave  a  great  impetus  to  the  Eastern 
trade  ;  and  in  the  following  century  the  export  of  specie 


WEALTH.  171 

to  the  East  amounted  to  and  less  than  352  millions, 
or  at  the  rate  of  three  and  a  half  millions  a  year  through- 
out the  entire  century.  The  magnitude  of  this  sum  will 
be  clearly  ap])rehended  when  we  state  that,  according  to 
Mr.  Jacob,  whose  authority  we  accept  upon  these  mat- 
ters, the  total  existing  stock  of  gold  and  silver  money  in 
Christendom  (/.  ^.,  after  deducting  the  amount  of  the 
precious  metals  converted  into  ornaments,  or  lost,  or 
destroyed  by  wear)  was  380  millions  in  1810,  which,  al- 
lowing for  the  100  millions  yielded  by  the  mines  between 
xSoo  and  iSio,  shows  that  the  total  existing  stock  at  the 
beginning  of  the  present  century  must  have  been  consid- 
erably less  than  the  amount  of  gold  and  silver  which 
had  been  exported  to  the  East  during  the  preceding 
century. 

"  We  now  come  to  a  critical  time  in  the  history  of  the 
precious  metals,  and  also  not  only  of  the  trade  with  the 
East,  but,  as  has  recently  and  tardily  become  recognized, 
of  the  monetary  and  commercial  condition  of  the  world 
at  large.  In  the  year  1810,  during  the  occupation  of 
Spain  by  the  armies  of  Napoleon,  the  Spanish  colonies 
of  South  America  and  Mexico  revolted  against  the  rule 
of  the  mother  country.  A  long  period  of  revolutionary 
wars  ensued  ;  industry  was  paralyzed,  the  whole  region 
relapsed  into  a  state  of  chaos,  and  the  working  of  the 
mines,  both  in  Peru  and  Mexico,  temporarily  ceased. 
The  result  was  that  the  world's  supply  of  the  precious 
metals  was  reduced  by  one  half,  falling  from  ten  millions 
in  1810  to  an  average  of  only  five  millions  during  the 
next  twenty  years.  This  disastrous  change  was  strik- 
ingly reflected  in  the  export  of  specie  to  the  East,  which, 
according  to  Mr.  Jacob,  declined  from  three  and  a  half 


1/2 


MONE  Y. 


millions,    which   it  had   averaged    from    1700    down  to 
1810,  to  only  two  millions  a  year  from  1810  to  1830. 

"  For  the  ensuing  period  we  have  no  statistics  or  reliable 
computation  of  the  export  of  the  precious  metals  to  the 
East  generally.     We  must,  therefore,  confine  our  state- 
ment to  India,  which  has  always,  and  especially  in  recent 
times,  been  by  far  the  chief  absorbent  of  gold  and  silver 
from  the  Western   world.     Between   1834  and   1852  we 
find,  from  the  statistics  furnished  by  Colonel  Hyde,  late 
Master  of  the   Calcutta   Mint,  that  the   surplus  of  the 
imports  of  silver  over  the  exports  in  India  amounted  to 
twenty-nine    millions    sterling,    which    gives    an    annual 
average  of  one  and  one  third  million  of  silver  absorbed 
by    India.     During    that    period    there    appears    a   new 
element  in  the  case — namely,  the   home  bills   or  drafts 
drawn  by  our  government  upon  the  Indian  government, 
representing  payments  due  from  the  Indian  executive  to 
this   country.      Doubtless    such    payments    had    always 
been  in  existence  to  some  extent  under  the  East  India 
Company,  although  prior  to  this  time  we  have  no  official 
record  of  them.     These  home  bills  during  the  period  in 
question,  1834-52,  averaged  one  and  three  quarter  mil- 
lion a  year.     Accordingly  the  exports  of  silver  to  India, 
together   with    these    home    bills    equivalent   to    specie, 
averaged  during  this  period  three    and  a  half  millions 
annually,  just   equal  to    the    average   export    of   specie 
throughout  the  hundred  and  ten  years  ending  with  1810. 
Doubtless  there  was  some  export  of  gold  to  India  during 
the  twenty  years  ending  with   1852,  of  which  we  find  no 
official  record.     But  viewing  the  whole  case,   it   seems 
evident  that,  contemporaneously  with  the  falling  off  in 
the  world's  supply  of  the  precious  metals,  there  was  a 


WEALTH.  173 

stagnation  in  the  trade  with  the  East,  which  cannot  be 
carried  on  without  a  commensurate  supply  of  specie. 

"  We  now  come  to  the  conchiding,  and  by  far  the 
most  remarkable  and  important  epoch  of  the  trade  with 
the  East,  during  which  it  has  been  the  most  powerful 
factor  in  determining  the  value  of  the  precious  metals, 
and  of  money  generally  in  the  Western  world.  Soon 
after  1852  the  memorable  expansion  of  our  Indian  trade 
set  in.  The  vast  supply  of  new  gold  from  California 
and  Australia  created  an  abundance  of  metallic  money 
or  international  currency  ;  and  as  gold  could  largely 
take  the  place  of  silver  in  the  currencies  of  the  Western 
world,  a  large  quantity  of  the  latter  metal  became  availa- 
ble for  carrying  on  an  increase  of  trade  with  India  and 
other  silver-using  countries  of  the  East.  Thus  sup- 
ported, in  1855-6  an  immense  expenditure  of  British 
capital  was  begun  in  India  for  the  construction  of  rail- 
ways. Mr.  R.  W.  Crawford  stated  in  1876  that  the  total 
expenditure  for  this  purpose  amounted  to  ninety-four 
millions  sterling,  of  which  sum  fifty-four  millions  were 
expended  in  India.  And  just  as  this  expenditure  was 
coming  to  a  close  in  1862,  the  cotton  famine  commenced, 
owing  to  the  civil  war  in  tlie  United  States,  whereby  our 
cotton  merchants  were  compelled  to  have  recourse  to 
India  for  a  supply  of  the  raw  material  of  our  great  tex- 
tile industry.  Under  these  combined  influences,  a  vast 
amount  of  money  was  invested  in  India,  which  operated 
like  a  fertilizing  flood,  increasing  production  and  exports, 
and  also  enabling  the  population  of  India  to  increase 
their  imports  and  consumption  of  foreign  commodities. 
And  thus  the  foreign  trade  of  India  in  merchandise, 
including  both  exports  and  imports,  which  amounted  to 


174  MONEY. 

thirty-seven  millions  sterling  in  the  official  year  1855-6, 
rose  steadily  to  ninety-five  millions  in  the  year  1865-6, 
nearly  trebling  during  those  ten  years. 

"  Such,  then,  have  been  the  vast  and  beneficial  effects 
of  the  trade  with  the  East  upon  the  value  of  precious 
metals,  and  of  money  generally,  throughout  the  Western 
world,   alike   in   past    centuries,   after   the   discovery   of 
America,  and  during  the  still  vaster  and  more  remarka- 
ble inflood  of  these  precious  ores  since  the  discovery  of 
the  new  American  and  Australian  mines.     This  Eastern 
trade  has  happily  carried  off  or  found  profitable  employ- 
ment for  every  spare  ounce  of  the  350  millions  of  gold 
which,  since  1848,  have  been  poured  into  the  world  from 
the  new  mines  ;  entirely  preventing  the  immense  fall  in 
the  value  of  money,  which,  at  the  instant,  appeared  so 
inevitable  and  appalling.     By  preventing  a  fall   in  the 
value  of  money,  it  has  made  every  ounce  of  the  new 
gold,  and  until  recently  of  silver,   as  highly  valuable  as 
in  previous  times  :  thus  maintaining,  at  its  full  value,  the 
labor  of  the  miners,  and  saving  the  whole  civilized  world 
not  merely  from   a  monetary  revolution,  but  from  the 
pure  and  heavy  loss  which  would  have  resulted  from  a 
diminution  in  the  value  of  the  vast  existing  stock  of  gold 
and  silver.     Solely  and  directly  in  consequence  of  the 
trade  with  the  East,  as  the  new  gold  has  flowed  into  Eu- 
rope,  silver   has    flowed   out  ;    and   thus   the    increased 
commerce  with  the  East  has  proved  to  mankind  a  double 
blessing  ;  at  once  augmenting  employment  both  in  the 
Eastern   and  Western    worlds,   and    averting  any   great 
change  in  the  value  of  money.     It  is  a  waste  pipe  by 
which  nothing  is  wasted  ;  it  is  a  channel  by  which  we 
not  only  get  rid  of  a  surplus  of  the  precious  metals,  but 


WEALTH.  175 

turn  them  to  most  profitable  account.  In  so  far  as  the 
new  gold  and  silver  mines  shall  remain  productive,  the 
prosperity  of  the  world  depends  upon  the  continuance 
of  this  drain  of  bullion  to  the  East.  Without  it  the  new 
supplies  of  the  precious  metals  would  be  robbed  of  their 
usefulness,  through  a  great  fall  in  their  value.  Their 
beneficial  effect  would  be  merely  local  and  evanescent ; 
but  with  it  the  whole  world  will  be  partakers  in  its  bless- 
ings. At  present,  unfortunately,  this  conduit  or  waste 
pipe  is  narrowed  by  the  '  Council  Drafts,' — a  circum- 
stance natural  and  proper  of  itself,  but  which  is  highly 
disadvantageous  not  only  to  our  Indian  Empire,  but  to 
the  world  at  large,  by  producing  a  fall  in  the  value  of 
silver,  which  not  only  lessens  the  value  of  the  labor  of  the 
silver-miners,  but  of  the  entire  amount  of  the  vast  stock 
of  silver  existing  throughout  the  world — the  accumulated 
result  and  legacy  of  many  generations  of  past  labor." 

The  "  savings  "  of  the  United  Kingdom  are  estimated 
at  the  lowest  computation  as  above  ;^ioo, 000,000  annu- 
ally, so  that  "  wealth,"  its  production  and  distribution,  is 
an  important  study.  Nearly  all  men  are  engaged  in  the 
creation  of  wealth.  The  right  way  of  working  for  it,  the 
most  fitting  method  of  attaining  it,  must  be  of  value 
to  every  one.  Practical  men  have  their  theories  and 
crotchets.  They  abound  with  views  founded,  as  they  will 
tell  you,  on  experience  ;  and  when  new  principles  are 
proposed,  none  are  so  quick  as  practical  men  to  crush  you 
with  the  better  wisdom  of  custom  and  prevalent  practice. 
If  panics  and  commercial  crises  teach  us  any  thing,  it 
is  that  trade  and  industry  periodically  go  to  ruin  because 
of  a  transient  embarrassment,  in  no  way  affecting  the 
solvency  of  British  trade,  but  solely  because  of  a  defect 


176  MONEY. 

in  our  monetary  system,  through  which  the  whole  com- 
merce of  the  country  is  upset,  and  traders  robbed  of  their 
wealth,  through  depression  of  the  markets  ;    and  hun- 
dreds of  firms,  as  solvent  as  the  Bank  of  England  are 
forced  into   the    Gazette,   because  of  the  inelasticity  of 
our  Currency  Act,  by  which  the  ordinary  monetary  ac- 
commodation is  withdrawn  from  trade  at  the  very  time 
when  it  is  most  urgently  required.      How  long  is  this  to 
last  !     Until  the  practical  man  studies  more  thoroughly 
than  he  has  done  the  science  of  wealth.     It  will  give  to 
his  mind  more  breadth — will  cause  him  to  be  more  com- 
plete  in   his   investigation,  in  the   questioning  of  facts, 
and   the  more   careful  digestion  of  the  instruction  they 
contain.     By  no  other  method  can  he  keep  in  advance, 
and    be    able    to    shake    off  many    of  the    complicated, 
artificial,  and   cumbrous  rules  laid  down  for  the  attain- 
ment of  wealth.     By  science   alone   can   men  be  made 
superior   to    the    old    fallacy    that    the  precious    metals 
should  be   the  one  supreme  object  of  industrial  ambi- 
tion ;  that  to  acquire    them,    all    the    resources    of   the 
intellect,  the  capital,  the  labor   of  the  nation,  must   be 
applied  ;  that  the  export  trade   must  be  exalted  over  the 
import  trade,  because  it  attracts  homewards  the  influx 
of  the  wealth-imparting   stream   of    metal ; — as    if    the 
national  prosperity  could   only  be  measured  by  the  ac- 
cumulation of  ingots,  as  if  buying  were  not  as  important 
as   selling.     Once   give  the   subject  your   thought,  you 
will  soon  perceive  that  the  power  and  prosperity  of  your 
country,  the  well-being  of  its  population,  and  their  con- 
tentment with  the  social  system  that  surrounds  them,  are 
largely  involved  in  a  correct  apprehension   and   a  firm 
application    of    economic    science  ;    as    true    principles 


WEALTH.  177 

enrich,  whilst  false  principles  impoverish  the  nation. 
Free  trade  or  protection,  direct  or  indirect  taxation,  the 
laws  of  limited  liability  or  unlimited  liability  as  applied 
to  partnership,  companies,  and  banks,  the  currency  laws, 
poor  laws,  land  laws,  and  the  law  of  bankruptcy,  whether 
framed  to  relieve  or  punish  the  careless  or  fraudulent 
debtor,  are  subjects  that  every  man  should  have  an 
opinion  upon,  and  get  all  the  light  upon  that  the  thought- 
ful men  of  these  and  other  times  have  shed.  Such  light 
is  now  much  needed  to  guide  us.  It  will  not  do  to  float 
along  the  stream  of  life  at  haphazard,  and  to  take  no 
thought  for  guiding  your  conduct  in  attaining  wealth,  or 
the  object  you  may  be  pursuing  in  life.  Life  must  be  ^ 
"  more  real,  more  earnest  "  than  it  has  been.  The  errors 
around  us,  the  evils  acquiesced  in  from  carelessness,  the 
good  left  undone  from  indifference,  are  amongst  the  most 
fruitful  causes  of  human  suffering.  Wealth  arises  from 
an  increase  in  the  produce  of  our  soils  and  our  docks — 
viz.,  grain,  animals,  weaving  materials,  and  fruits — and 
of  coal,  iron,  and  other  metals;  or  from  a  diminution 
in  the  cost  of  production  thereof  ;  or  from  an  increase 
in  the  amount  of  foreign  goods  which  we  manufacture 
and  export,  or  in  a  diminished  cost  in  the  manufacture  of 
them  ;  from  the  wise  investments  of  our  spare  capital  in 
the  construction  of  railways  or  other  similar  enterprises 
that  lessen  the  cost  and  facilitate  the  transport  of  people 
and  goods  ;  and  devoting  our  brains,  labor,  and  capital 
to  the  production  of  articles  that  give  the  best  possible 
value  to  the  consumer,  and  yield  a  profit  to  the  pro- 
ducer. It  has  become  imperative  that  our  leaders  raise 
their  voice  as  one  man  against  that  mischievous  doc- 
trine, that   the   "  wealth  of  the  nation  "  is  the  exclusive 


178  MONEY. 

product  of  manual  labor.  This  unjust  and  unfounded 
assumption  must  be  combated,  and  the  laborer  invested 
with  that  consideration  alone  which  his  share  entitles 
him  to.  Labor  must  hold  its  subordinate  position  ;  and 
the  capital  and  skill  that  search  out  the  best  method  and 
direct  their  successful  application,  must  hold  the  high 
position  they  are  entitled  to.  If  laborers  need  this 
enlightenment,  the  people  generally  require  to  be  taught 
how  to  guard  against  the  insidious  doctrine  of  protec- 
tion. It  is  the  universal  ignorance  of  communities  that 
enables  the  selfish  few  to  dare,  for  the  gain  of  the  select 
few,  to  propose  tariffs,  subsidies,  bounties,  etc.,  that  are 
all  adverse  to  the  interests  of  the  many.  They  are 
attempts  by  traders  to  eliminate  competition  from  their 
class,  and  thus  enhance  the  value  of  their  product ; 
attempts  that  dare  not  be  persisted  in  one  moment  if  the 
people  understood  economic  science.  I  have  no  hesita- 
tion in  denouncing  protection  as  the  greatest  curse  a 
nation  can  suffer  under,  as  being  asked  for  by  those  who 
trample  under  foot  and  ignore  the  prosperity  of  the 
nation.  When  will  men  learn  that  what  is  "  morally 
wrong  "  never  can  be  politically  or  socially  right  ;  that 
a  policy  that  cannot  be  defended  on  the  ground  of 
principle,  can  only  be  excused  on  the  plea  of  necessity 
by  cowards  ?  The  statesmen  or  nations  that  yield  to 
necessity,  and  sink  to  the  level  of  expediency,  instead  of 
keeping  to  the  height  of  principle,  should  be  the  objects 
of  our  pity,  as  being  the  victims  of  a  misfortune  which 
has  vanquished  their  judgment.  Statesmen  should  be 
great,  not  specious  and  "  clever," — wise,  not  subtle,  like 
charlatans.  Nothing  is  worse  for  a  nation  than  to  be 
ruled  by  men  endowed  with  that 


WEALTH.  179 

'*  Low  cunning  which  Nature,  kind,  indulgent  parent,  gave 
To  supply  the  place  of  wisdom  to  the  knave." 

The  success  of  this  type  of  men,  whether  as  politicians, 
lawyers,  doctors,  or  traders,  would  be  impossible  if  the  in- 
telligence of  the  people  were  equal  to  the  refuting  of  these 
fallacies  and  illusions.  The  mind  must  be  imbued  with 
accurate  principles ;  prejudices  must  be  combated  ; 
truth  must  be  firmly  implanted,  and  more  correct  views 
given  to  all  as  to  how  the  wealth  and  happiness  of  the 
people  are  to  be  obtained. 

Monetary  writers  assume  that  the  delusive  doctrine 
that  "  gold  is  wealth,"  that  "  wealth  consists  solely  of 
money,"  was  dispelled  by  Adam  Smith  ;  and  Mr.  Mill 
paints  the  idea  as  an  absurdity  so  palpable  that  the 
present  age  regards  it  as  incredible,  as  a  crude  fancy  of 
childhood  ;  yet  I  heartily  endorse  Mr.  Bonamy  Price's 
opinion,  that  this  doctrine,  that  gold  is  wealth,  breathes 
in  every  line  of  the  City  articles  in  all  our  daily  news- 
papers ;  nay,  further,  if  you  were  to  ask  1,000  men  their 
opinion,  999,  if  not  the  1,000,  would  say  the  same.  The 
intelligence  of  the  present  age  is  a  great  fallacy.  I  am 
willing  to  admit  there  are  giants  in  our  midst,  whose 
power  of  thought  is  akin  to  the  marvellous,  whose 
breadth  of  vision  seems  without  limit  ;  men  worthy  of 
the  greatest  homage  from  their  fellow-men  ;  but  the 
general  knowledge  is  of  a  specious  character,  all  surface, 
— there  is  no  depth  in  it.  Men  do  not  think  out  the 
problem  of  life,  are  not  in  earnest  in  understanding 
themselves,  or  what  causes  the  miseries  that  •'  flesh  is 
heir  to."  Spite  of  all  that  has  been  done  by  theologians 
and  moralists,  men's  daily  lives  prove  that  they  do  not 
believe  that  the  greatest  blessing  is  to  possess  that  guar- 


l8o  MONEY. 

dian  angel,  "an  active  conscience,"  that  divine  monitor 
within  us  that  tells  us  unmistakably  how  wise  those  are 
''  who  do  to  others  as  they  would  be  done  by."  This,  in 
conjunction  with  the  enlightened  intelligence  that  has 
grasped  the  fact  of  God's  government  of  the  world  by 
fixed  laws,  is  what  we  need  to  banish  the  childish  idea 
we  hear  so  often,  that  disease,  depression  of  trade,  com- 
mercial crises,  bank  failures,  and  all  the  miseries  in  their 
train,  occur  because  "  Providence  has  for  some  good 
reason  thought  fit  to  punish  us"  for  our  manifold  sins 
and  wickedness  ;  instead  of  seeing  that  all  these  depres- 
sions and  misery  arise  from  the  ceaseless  action  of  sel- 
fishness in  the  never-dying  force  of  class  and  personal 
interests,  in  the  steady  and  constant  efforts  to  promote 
private  gains  at  the  cost  of  the  whole  community  ;  that 
men  suffer  because,  with  an  immediate  gain  before  them, 
a  something  they  can  see  and  handle,  they  are  not  equal 
to  the  sacrifice  necessary  to  insure  the  larger  and  more 
prolific  result.  Their  decisions  are  based  upon  the 
narrow  vision  of  personal  advantage ;  they  have  not 
brains  enough  to  grasp  the  higher  truth,  that  the  welfare 
of  each  is  most  effectively  achieved  by  securing  the  wel- 
fare of  all.  Hence  the  retribution  is  fearful  :  industry 
languishes  ;  whole  trades  are  swept  away  ;  ruin  periodi- 
cally overwhelms  once  noble  industries  ;  and  immense 
manufacturing  and  distributive  establishments  are 
crushed    and    submerged    in    the    general    ruin. 

One  cause  of  want  of  progress  is  being  tied  down  to 
superstitions  and  conventionalities.  Take  the  study  of 
antiquity — very  well  in  its  place,  but  it  goes  out  of  that 
place  when  a  too  great  reverence  for  it  paralyzes  our 
further  movements.     The  same  with  classical  teaching. 


WEALTH.  l8l 

The  reasoning  of  George  Combe  seems  to  me  unanswer- 
able :  "  I  do  not  denounce  the  ancient  languages  and 
classical  literature  on  their  own  account,  or  desire  to 
see  them  cast  into  utter  oblivion.  I  admit  them  to  be 
refined  studies,  and  think  that  there  are  individuals  who, 
having  a  natural  turn  for  them,  learn  them  easily,  and 
enjoy  them  much.  They  ought,  therefore,  to  be  culti- 
vated by  all  such  persons.  My  objection  is  solely  to  the 
practice  of  rendering  them  the  main  substance  of  the 
education  bestowed  on  young  men  who  have  no  taste  or 
talent  for  them,  and  whose  pursuits  in  life  will  not  ren- 
der them  a  valuable  acquisition." 

"  Work,  work  in  the  living  present, 
Heart  within,  and  God  o'erhead." 

LONGFELLLOW. 

I  may  not  be  able  to  prove  it,  but  have  no  hesitation 
in  asserting  that  panics,  crises,  bankruptcy,  the  extent  of 
which"  makes  one  shudder,  are  caused  by  a  superstitious 
adherence  to  old  customs,  by  fallacious  theories  in  the 
minds  of  mercantile  men  that  regulate  their  conduct,  and 
are  held  as  the  secret  by  which  men  can  get  rich — one 
of  which  is,  that  trade  is  to  be  regulated  by  the  amount 
of  gold  coming  into  the  country,  and  orders  are  to  be 
given  boldly  because  the  rate  of  discount  is  low,  or  that 
a  panic  is  at  hand,  a  crisis  imminent,  because  we  have  to 
pay  in  gold  for  corn  or  raw  material  from  abroad.  Peo- 
ple will  not,  cannot  see  that  the  function  of  money  is 
to  buy  with — that,  in  fact,  we  get  the  *'  raw  material " 
with  it,  exchanging  the  symbol  of  wealth  for  its  reality. 
Such  an  error  of  judgment,  fraught  with  such  terrible 
consequences  as  a  "  panic,"  would  not  be  possible  if 


1 82  MONEY. 

people  were  taught  currency  at  school  instead  of  Greek 
and  Latin,  if  common-sense  instead  of  prejudice  guided 
us,  so  that  the  study  of  an  article  of  the  most  universal 
use  in  daily  life  was  explained  in  plain  and  intelligible 
language.  Bank  notes  and  sovereigns  are  capable  of 
clear  and  simple  exposition,  and  are  understandable  by 
the  ordinary  human  intellect.  But  we  must  be  guided 
by  thinkers — men  like  Smith,  Mill,  Price — before  we  can 
rescue  money  from  the  position  we  find  it  in.  Authority 
contradicts  authority — the  Bank  Act  to  one  set  meaning 
ruin,  to  another  salvation — because  the  world  has  chosen 
to  defer  to  great  merchants  and  bankers,  who  are  called 
in  and  consulted  when  the  patient  is  unwell,  instead  of 
those  who  have  analyzed  the  facts,  and  explained  their 
meaning,  and  who  have  given  us  a  basis  from  which 
reasoning  may  take  its  origin  and  first  principles  be  ob- 
tained. There  is  only  one  road  to  true  science,  only  one 
foundation  on  which  it  can  rest — a  thorough  analysis  of 
the  facts,  and  a  firm  determination  to  accept  what  they 
teach  and  nothing  else.  Begin  with  currency  from  the 
beginning  ;  observe  accurately,  observe  fully  ;  acquire 
your  first  truths  with  a  sound  intellectual  conscience,  and 
judge  every  subsequent  problem  fearlessly.  Metallic 
currency,  or  coin,  furnishes  the  fundamental  laws  of  all 
currency.  Coin  is  a  simple  matter.  It  is  the  "  paper  " 
substitution  for  metal  that  causes  the  confusion,  the 
complications,  the  dogmatic  assertion  as  to  the  instru- 
ments of  exchange.  By  thoroughly  understanding  the 
operation  of  coin  you  will  get  at  the  principles  of  cur- 
rency. Do  not  be  misled  by  the  magnitude  and  compli- 
cations of  modern  trade.  The  idea  that  they  involve 
some  mysterious  and  indescribable  influence  is  a  pure 


WEALTH.  183 

illusion  ;  dissect  the  vastest  operation,  and  it  resolves 
itself  into  A  selling  to  B  an  article  because  he  wants 
money  to  buy  something  of  C,  and  B  buying  of  A  be- 
cause he  wants  what  A  has  to  sell  more  than  the  money 
he  gives  in  exchange.  Therefore,  you  must  first  produce 
and  exchange  what  you  have  produced  for  money,  which 
enables  you  to  buy.  The  foreign  trade,  with  its  ships 
on  every  sea,  is  precisely  the  same — A  seeking  to  ex- 
change with  B,  and  exchanging  his  products  for  coin,  or 
for  bills  of  exchange,  which  are  simply  deferred  payment ; 
the  sale  is  for  "  money,"  but  the  seller  has  accepted  a 
promise  to  be  paid  the  money  some  three,  four,  or  six 
months  hence  instead  of  now,  and  A  wanting  the  money, 
and  not  being  able  to  wait  till  B  redeems  his  promise, 
transfers  his  rights  thereto  to  a  banker,  who  lends  him 
the  money  upon  the  security  of  the  bill,  less  so  much 
interest.  This  description  contains  the  essential  elements 
of  all  trade,  and  you  will  perceive  that  "  money  "  is  not 
sought  by  any  one  for  its  own  sake.  It  is  a  means  to  an 
end,  but  not  the  end  itself.  It  is  a  tool,  procured  solely 
for  the  sake  of  the  work  it  performs,  and  not  because  it 
possesses  qualities  that  make  it  good  and  desirable  to 
have  it  for  its  own  sake.  The  wish  to  have  it  makes 
people  think  the  getting  of  it  a  complete  thing  in  itself. 
They  forget  that  it  is  obtained  to  be  got  rid  of,  that  it  is 
worthless  unless  it  is  used,  and  it  is  not  used  till  it  is 
parted  with.  Better  understood,  wealth  would  cease  to 
be  our  master — we  should  be  master  of  it  ;  and,  instead 
of  selling  our  souls  for  the  wealth  of  gold,  we  should  be 
able  to  use  it  for  the  wealth  of  beauty,  the  wealth  of 
goodness  its  power  places  within  our  graSp.  Money  is 
nothing  but  an  interspersed  commodity — a  power  of  pur- 


1 84 


MONE  Y. 


chase — the  very  end  of  whose  existence  is  to  be  got  rid 
of  with  all  practicable  speed.     When,  therefore,  bankers 
tell  the  world  that  it  is  of  the  utmost  importance  to  trade 
to  keep  gigantic  treasures  of  money  in  a  cellar,  they  im- 
pose upon  themselves  the  burden  of  proving  that  they 
know  what  money  is,  that  they  understand  its  object  and 
function,   and   that  large    masses    of  money  which  are 
never    touched,  and    which,  in  all   human    probability, 
never  will  be  touched,  are  not  a  practical  and  scientific 
absurdity.     Every  sale  for  money  is  only  half  a  transac- 
tion ;  the  transaction  is  not  completed  until  the  money 
has  bought  other  articles.     Money    is,    or    should    be, 
always  seeking  to  buy  ;  money  hoarded  or  not  used  is  for 
the  time  annihilated  as  money  ;  it  is  like  a  field  left  un- 
cultivated.    Another  mercantile  superstition  is  that  you 
cannot  have  too  much  money  ;  that  as  with  money  you 
can  buy  any  thing,  money  is  true  riches,   and  the  more 
gold    a  nation  can    get  the  better.     True  to  a   certain 
point,  gold  and  silver  being  wealth  ;  but  those  who  speak 
so  strongly  in  favor  of  individuals  and  nations  increasing 
their  wealth  in  the  form  of   the  "  precious  metals,"  over- 
look the  fact  that  gold  has  to  be  paid  for  like  every  other 
commodity.     It  is  a  very  expensive  affair  to  obtain  gold 
out  of  a  mine  ;  a  great  deal  of  timber,  and  tools,  and 
gunpowder,  and  wages  is  consumed  in  the  business,  and 
the  country  which   gets  the  gold  has  to  pay  for  all  these 
things.     Gold  being  wealth,  a  nation  is  richer  if  it  gets  it 
for  nothing  ;  but  the  real  question  is,  the  wisdom  of  buy- 
ing it  and  paying  for  it  with  other  commodities  to  hoard 
in  banks  to  meet  the  supposed  wants  of  our  law  of  cur- 
rency.    Having   mastered    the    scientific    side    of    the 
subject,  practical  men  would  at  once  try  to  alter  this  law 


WEALTH.  185 

SO  as  to  need  as  little  as  possible  of  so  expensive  a 
medium  of  exchange  as  "  gold."  Under  "  Banking  "  I 
have  pointed  out  how  little  gold  is  really  needed  in  a 
country  like  ours  ;  full  of  shops,  closely  packed  together, 
in  which  the  movement  of  trade  is  rapid,  credit  is  largely 
given,  and  banks  exist  in  great  numbers.  Every  effort 
should  be  directed  to  settle  transactions  by  checks,  so 
that  "book-keeping  "  would  be  substituted  for  "sover- 
eigns," and  year  by  year  less  gold  would  be  wanted  in 
proportion  to  the  sales  effected  ;  the  quantity  needed 
should  only  be  sufficient  to  use  as  small  change,  of  which 
each  individual  should  carry  the  minimum  quantity 
about  with  him,  or  keep  for  change  in  his  till.  Keep 
this  truth  in  your  mind,  that  a  nation  is  not  the  poorer 
for  possessing  little  gold,  nor  the  richer  for  having  much. 
There  is  "  enough  "  gold  when  every  man  who  wants 
change  can  get  it,  when  there  is  enough  gold  to  supply 
what  is  needed  for  those  transactions  where  it  is  neces- 
sary for  coin  to  pass  from  one  man's  hand  to  another  ; 
any  surplus  must  lie  idle,  and  can  be  redeemed  from 
being  a  waste  only  by  being  exported  abroad,  or  by 
diminishing  in  value.  The  vast  treasures  buried  in  the 
vaults  of  the  great  Banks  of  England  and  France  are  a 
most  gigantic  waste,  caused  by  an  erroneous  conception 
of  currency.  ("The  Principles  of  Currency,"  by 
Bonamy    Price.) 

We  want  to  think  more  of  "  real  wealth  "  and  less 
of  the  one  kind  of  wealth,  the  "  precious  metals."  The 
love  of  gold  is  an  indication  of  low  culture.  The 
precious  metals  flow  to  countries  of  low  civilization, 
of  great  political  anxiety,  which  hoard  money,  and  trade 
for  cash  ;  whilst  they  find  small  resting-place  in  lands  of 


1 86  MONEY. 

high  commercial  development,  where  property  is  safe, 
and  the  owners  of  goods  are  willing  to  part  with  them 
for  checks  and  bills,  and  other  processes  of  deferred 
payment.  An  increased  quantity  of  wool,  tea,  meat,  is  a 
national  benefit  ;  the  larger  supply  causes  a  reduction  of 
price,  which  means  that  every  one  can  get  more  wool, 
tea,  meat,  than  heretofore  for  the  same  money.  But  if 
the  world  had  enough  gold,  and  the  mines  kept  on  in- 
creasing the  supply  beyond  the  demand,  the  gold  must 
become  cheaper,  or  the  miner  cease  to  mine.  But  cheap 
gold  is  no  gain.  We  do  not  want  two  sovereigns  to  do 
the  work  now  performed  by  one.  If  sovereigns  were  to 
be  as  cheap  as  shillings,  it  would  be  a  serious  evil  ; 
whereas  if  iron  is  made  cheaper,  iron  rod  castings  are 
so  much  less,  leaving  more  money  to  be  expended  on 
other  things.  This  is  not  the  case  with  gold  acting 
as  money  ;  cheapening  of  gold  merely  means  that  more 
gold  has  to  be  given  than  heretofore  for  an  article  ; 
a  larger  quantity  of  it  is  quoted  to  specify  the  value 
of  all  articles.  The  prices  are  higher,  but  the  two 
coins  only  getting  in  exchange  the  same  article  as  one 
had  previously  done,  no  one  is  really  better  off  ;  neither 
the  individual  nor  the  nation  is  richer.  To  increase  our 
"  wealth,"  we  want  superior  facilities  for  the  greater 
and  more  economical  production  and  distribution  of  all 
commodities  ;  so  that  we  get  more  "  wealth  "  in  exchange 
for  its  symbol  —  the  sovereign  —  than  heretofore.  It 
was  the  people's  ignorance  of  this  truth  that  led  to 
the  great  depression  of  1874  to  1879.  The  inflation 
of  prices  in  1869  to  1872  was  imagined  to  be  an 
increase  in  the  real  wealth  of  the  country.  The 
wealth  was  the  same,  but  the  higher  prices  caused  it  to 


WEALTH.  187 

be  represented  in  higher  values.     Please  understand  this 
clearly  :  your  wealth,  we  will  assume,  consists  of  stock 
value  ^100,  furniture,  etc.,  ^100  ;  something  similar  to 
the  "  prosperous  "  times  of  1869-1872  takes  place,  and 
the  stock  and  furniture  you  possess  at  the  then  quoted 
prices  are  represented  as  worth  £,A'=>°  instead  of  ^^200  ; 
but   the   real  wealth — the  stock,  furniture,  etc. — is  just 
the  same,   whether  quoted   at   ^100,   ;^20o,   or  ^400- 
The  mistake  was  in  the  people  thinking  this  real  wealth 
was  doubled,  whereas  it  was  only  its  nominal  value,  and 
when  exchanged  for  the  £,A^°  it  was  found  the  larger 
sum   would    only  produce,   when  you    wanted    to   buy, 
owing  to  the  higher  prices  of  all  articles,  what  the;^200 
used  to  do.     But,   unfortunately,  through   ignorance  of 
economic  science,  the  public  generally  began  to  launch 
out  and  indulge   in   luxuries   hitherto    abstained   from, 
under  the  mistaken  notion  that  they  were  richer  than 
heretofore  ;  rents  naturally  went  up,   and  once  up,  it  is 
difficult  to  get  them   down,    although    this    must    right 
itself.     What  I  want  you  to  see  is,  that  "  doubling  the 
rent  of  a  house"   (or  any  thing  else),  and  arguing  as 
people  do,  that  because  the   "  income-  and  property-tax 
returns  "  are  so  much  higher,  therefore  the  nation  is  so 
much   more  wealthy,   is  a  great  fallacy.     The  nation  is 
only  richer  by  an  increase  in  the  number  of  houses,  by  an 
increase  in  the  quantity  of  all  articles  representing  real 
xvealth  ;  but  it  does  not  become  richer  because  A  makes 
B  pay  more  rent  for  his  house  than  before  ;  this  process 
only  increases  the  wealth   of  A   at   the   expense    of  B. 
The  same  rule  applies  to  consols,  stock,    and    shares  ; 
their  going  up  or  down  is  immaterial,  viewed  as  "  na- 
tional wealth  "  or  indebtedness  :  these  remain  the  same, 


1 88  MONE  Y. 

but  by  the  fluctuations  A  gets  a  stock  bearing  a  certain 
yearly  interest  from  B  at  a  less  sum  than  B  paid  for  it  ; 
B  loses  as  much  as  A  gains.  The  wealth,  or  debt  rather, 
remains  the  same,  but  is  bought  by,  and  transferred  to, 
another  person,  for  so  much  less  or  so  much  more 
money,  the  price  depending  upon  the  market  value  being 
up  or  down  at  the  time  of  purchase  or  transfer. 

CAPITAL. 

"  The  acquisition  of  property,  the  accumulation  of  capital,  is 
already  in  the  power  of  the  better-paid  working  class  ;  and  legisla- 
tion has  but  few  further  facilities  to  give,  or  obstacles  to  remove, 
their  savings  are  now  so  large  that  only  soberer  habits  and  sounder 
sense  are  needed  to  make  them  independent  capitalists  in  less  than 
half  a  lifetime."— W.  R.  Greg. 

The  capital  of  a  country  is  the  accumulated  savings 
of  the  people — the  balance  of  the  produce  they  have 
abstained  from  using,  and  having  lent  the  same  to  labor,  to 
purchase  the  necessary  materials,  and  necessaries  of  life, 
whilst  employed  on  the  same,  the  result  is  represented 
by  its  railways,  houses,  mills,  furniture,  gold,  silver,  any 
thing  that  has  cost  labor  to  produce  or  procure,  and 
debts  of  foreign  nations,  as  they  represent  a  something 
that  another  nation  has,  but  which  we  have  a  lien  or 
mortgage  upon,  and  from  the  wealth  we  possess,  to  get 
at  our  capital,  we  must  subtract  what  we  owe  to  foreign 
nations.  It  is  a  singular  thing  that  banks  will  lend 
money  on  consols,  exchequer  bills,  or  any  government 
securities  as  they  are  termed,  and  not  upon  railway  de- 
bentures, not  even  willingly  upon  houses  ;  yet  here  we 
have  a  real  security,  bona  fide  capital,  real  wealth  ;  whereas 
consols,  or  any  government  security,  are  simply  debts  ;  the 


CAPITAL.  189 

money  given  for  the  paper  that  represents  the  debt  has 
been  spent, — there  is  no  security  except  the  national 
honor.  The  national  capital  is  ascertainable  in  the  same 
manner  as  the  individual  capital,  and  means  the  balance 
to  the  credit  of  the  nation  or  the  individual,  after  allow- 
ing for  the  payment  of  all  liabilities.  So  that  govern- 
ment security,  consols,  etc.,  instead  of  being  a  benefit, 
as  part  of  the  national  capital,  is  a  millstone  round  a 
nation's  neck ;  instead  of  being  any  addition  to  our 
wealth,  is  a  liability,  and  must  be  subtracted  therefrom, 
with  other  liabilities,  before  we  can  get  at  the  capital  of 
the  country. 

The  distinctive  function  of  the  banker,  says  Ricardo, 
"  begins  as  soon  as  he  uses  the  money  of  others "  ;  so 
long  as  he  uses  his  own  money  he  is  only  a  capitalist. 
London  is  a  place  where,  in  all  but  the  rarest  times, 
money  can  be  always  obtained  upon  good  security,  or 
upon  decent  prospects  of  probable  gain.  This  is  an 
advantage  too  often  overlooked  by  us,  and  a  knowledge 
of  this  power  will  help  every  trader.  It  may  be  stated 
that  English  trade  is  carried  on  upon  borrowed  capital 
to  an  extent  that  few  of  us  have  an  adequate  idea  of. 
This  capital  is  advanced  to,  and  may  be  obtained  by, 
traders  in  every  district,  through  bankers  "  discounting 
the  bills  " — an  immense  advantage  to  modern  English 
business — to  the  "  new  men  "  who,  by  means  of  this 
borrowed  capital,  harass  and  press  upon  and  undersell 
the  old  capitalist,  who  confines  his  operations  to  the 
extent  of  his  own  money.  It  is  surprising  the  horror 
some  men  have  of  discounting  a  bill  ;  they  will  hold 
the  same  in  their  bill  box  till  it  matures  ;  and  to  get  a 
loan  from  their  bankers  upon  their  leases  or  other  securi- 


19c  MONEY. 

ties  they  consider  is  going  on  the  road  to  ruin.  Such 
men  are  not  equal  to  the  times,  do  not  recognize  the 
fact  that  money  is  an  economical  power,  that  to  get  on 
you  must  grasp  at  all  the  help  onwards  the  times  you 
live  in  admit  of.  For  instance  :  you  have  bills  in  your 
box  ;  bank  rate  is  2,  3,  4  per  cent.  ;  you  owe  money  ; 
there  are  men  who  will  lose  their  discount,  say  7^  per 
cent,  per  annum,  rather  than  discount  their  bills  ;  so 
they  lose  the  difference  between  what  they  could  borrow 
money  of  their  bankers  at,  and  what  the  manufacturer 
or  merchant  charges.  The  "  money  "  gets  lent,  as  the 
manufacturer  is  too  shrewd  a  man  to  keep  bills  idle  in 
his  safe.  "Well,"  you  say,  "it  so  happens  that  I  can 
discount  all  my  accounts,  and  yet  keep  all  my  bills  till 
they  mature."  If  so,  it  is  very  fortunate  for  you  ;  but 
still  money  is  an  economical  power  to  you  ;  you  may 
borrow  of  the  bankers  on  your  bills  or  securities,  and 
lend  the  money,  do  good,  and  make  a  profit  ;  but,  with 
your  temperament,  this  you  are  not  likely  to  do.  Then 
I  say,  anticipate payinent  of  your  accounts,  "  prepay,"  and 
make  a  large  profit  between  what  you  pay  the  bankers 
and  get  from  the  manufacturers,  besides  the  indirect  gain 
to  your  commercial  credit.  Dismiss  the  fallacy  from 
your  brain,  that  you  can  buy  or  sell  much  cheaper 
because  you  trade  with  your  own  capital  only.  The 
seller  does  not  care  whose  capital  it  is,  so  long  as  you 
keep  your  engagements,  and  pay  him  to  the  time  agreed 
upon  ;  and  if  you  use  your  own  capital,  you  expect  an 
interest  for  it,  5  per  cent,  at  the  least.  Now  I  do  not 
think  it  can  be  proved  that  any  tradesman  in  good 
credit,  having  customers'  bills  or  good  security  to  offer 
his  bankers,  pays,  year  by  year,  over  4  per  cent,  for  the 


CAPITAL.  191 

money  lent ;  so  Avith  a  small  capital  of  his  own,  and 
doing  as  much  trade  as  the  larger  capitalist  by  the  aid 
of  borrowed  capital,  he  can  sell  as  cheaply  as  the  capi- 
talist. In  fact,  the  advantage  of  our  banking  system  is, 
that  owing  to  the  certainty  of  obtaining  loans  on  dis- 
count of  bills,  or  otherwise,  at  a  moderate  rate  of  inter- 
est, there  is  a  steady  bounty  on  trading  with  borrowed 
capital,  and  a  constant  discouragement  to  confine  your- 
self solely  or  mainly  to  your  own  capital.  The  banking 
system  has  its  defects,  but  it  is  a  useful  medium  for 
getting  into  trade  new  men  who  will  be  content  with  low 
prices  ;  it  stops  us  from  being  dependent  on  "  merchant 
princes,"  and  keeps  us  from  going  to  sleep,  as  new  men 
are  not  wealthy,  so  run  greater  risk,  but  are  useful  in 
seizing  hold  of  new  advantages,  and  competing  with 
foreign  rivals.  The  wise  tradesman  is  he  who,  in  con- 
junction with  his  own  capital,  makes  a  prudent,  judicious 
use  of  his  "  economical  power,"  and  by  its  aid  takes 
advantage  of  every  opportunity  that  offers  to  extend  his 
business.  This  is  the  most  legitimate  way,  and  the  way 
in  which,  as  a  rule,  bankers  are  applied  to  ;  as  without 
this  aid,  men  would  be  compelled  to  restrict  their 
operations  to  the  amount  of  trade  justified  by  their  own 
capital.  It  is  by  the  skilful  use  of  "other  people's  capi- 
tal "  in  this  manner  that  some  men  seem  to  make  such 
sudden  progress,  and  it  is  our  banking  system  that  keeps 
in  use  our  capital,  and  it  is  by  this  unconscious  organiza- 
tion of  the  capital  of  the  country  that  England  possesses 
such  an  unequalled  fund  of  floating  money,  which  is 
ready  to  help  any  merchant  who  sees  a  prospect  of  a 
profit.  The  *'  Greeks,"  said  M.  de  Tocqueville,  "  the 
Styrians,  the  Italians,  the  Dalmatians,  and  the  Sicilians 


ig2  MONEY. 

are  the  people  who  will  use  the  Suez  Canal  if  any  use 
it."  But,  on  the  contrary,  the  main  use  of  the  canal 
has  been  by  the  English.  None  of  the  nations  named 
by  M.  de  Tocqueville  has  the  capital,  or  a  tithe  of  it, 
ready  to  build  the  large  screw  steamers  which  alone  can 
use  the  canal  profitably. 

This  is  a  broad  question,  yet  how  often  you  hear  this 
man  condemned  for  trading  beyond  his  capital,  the  other's 
success  demurred  to  because  he  had  abundance  of  capi- 
tal— both  positions  hard  to  prove,  as  often  a  man  will 
fail  when  his  capital  is  no  less  in  proportion  to  his  trade 
than  it  has  been  at  many  periods  of  his  career,  and  yet  he 
has  succeeded  before,  whereas  now  he  has  failed.  I  am 
strongly  of  opinion  that  good  management  with  a  little 
capital  is  more  likely  to  lead  to  success  than  an  abun- 
dant capital  without  the  good  management.  Many 
concerns  have  too  much  capital  ;  the  proprietors  are 
always  grumbling,  and  tell  you  they  do  not  get  interest 
for  their  money.  This  is  because  interest  is  added  to  the 
working  expenses,  for  capital  that  is  "  unproductive — 
merely  a  big  balance  at  the  bankers."  It  is  almost 
incredible  the  absurd  ideas  many  merchants  and  manu- 
facturers have  as  to  the  necessary  capital  to  carry  on  a 
business.  It  is  surprising  the  little  capital  needed  by 
skilful  financiers — viz.,  men  who  understand  "  money.'' 
There  is  plenty  of  evidence  of  men  with  no  capital, 
or  very  little,  being  always  punctual  in, their  payments, 
their  word  their  bond,  whilst  others  with  abundance 
of  capital  are  never  to  be  depended  upon.  Finance,  like 
Fortune,  will  not  be  played  with  ;  to  succeed  with  her, 
you  must  understand  her,  must  work,  must  be  in  earnest. 
To    make   capital  pay,    it  must  be   used.     I    have    no 


CAPITAL.  193 

opinion  of  any  tradesman  as  a  "man  of  business  "  who 
has  a  large  balance  always  lying  idle  at  his  banker's. 
The  banker,  of  course,  knows  the  value  of  money 
too  well  to  let  it  remain  idle  ;  so  he  makes  the  profit  that 
the  customer  might  have  had.  A  good  man  of  business 
has  his  pay  days  always  in  view,  knows  the  days  that  will 
require  all  his  strength,  and  carefully  lessens  the  weight 
all  he  can  beforehand  by  taking  advantage  of  every 
opportunity  that  offers  to  put  part  of  the  burden  a  little 
later  on,  or,  if  in  a  position  so  to  do,  to  prepay  and 
lessen  the  extra  strain  of  any  special  day.  And  having 
this  liability  ever  present  in  his  mind,  he  never  loses  the 
chance  of  a  sale,  if  there  be  a  profit — if  the  same  will  be 
paid  for  by  or  before  that  date  ;  and  so  masters  the  diffi- 
culty that  to  an  outsider  would  seem  insurmountable,  by 
knowing  exactly  what  he  has  to  do,  and  using  every 
available  resource  to  meet  it.  Such  men  will  sign  a 
check,  although  it  exhausts  their  balance  at  the  bank, 
seemingly  as  unconcerned  as  if  they  had  thousands  lying 
idle  ;  whilst  the  other  type,  to  whom  finance  is  a  mystery, 
who  dread  pay  days  and  view  bills  with  horror,  will 
often  lose  their  discount,  damage  their  credit,  for  fear,  if 
they  pay,  some  unknown  claim  may  be  made,  and  they 
not  have  the  wherewith  to  meet  it  ;  or,  being  always  in 
dread  of  not  meeting  their  bills,  will  call  and  tell  you 
they  hope  the  bill  will  be  met,  etc.  It  is  difficult,  if  you  take 
the  two  extremes,  to  know  where  to  draw  the  line  and  say, 
"  It  was  fraudulent  of  this  man  to  do  such  a  trade  with 
so  little  capital,"  as  in  many  cases  the  man  could  prove 
he  had  done  so  before  ;  but  his  judgment  has  erred 
at  last — he  has  got  his  money  locked  up,  or  some  error 
of  judgment  has  made  his  weakness  known  to   others. 


194  MONEY. 

The  real  crime  is  not  in  the  insufficiency  of  capital,  but 
in  a  man  keeping  on  and  incurring  fresh  liabilities  after 
his  balance-sheet  must  have  shown  him  the  hopelessness 
of  the  struggle.  The  capital,  indeed,  will  depend  upon 
the  credit  you  can  get  ;  this  will  depend  upon  the  man 
as  much  or  more  than  upon  the  money  that  he  has. 
Briefly,  a  good  manager  will  buy  as  well,  and  get  longer 
time,  will  sell  at  as  good  a  profit,  and  yet  get  his  money 
in  earlier,  and  will  make  more  of  the  money,  than  the  bad 
manager.  So,  before  you  can  decide  what  capital  is 
necessary,  or  if  you  can  lend  money,  you  must  know  who 
the  man  is,  and  his  business  capacity. 

The  same  remark  applies  to  nations.  Thrifty  business 
people  do  not  lock  their  money  up  ;  and  you  may  judge 
the  character  of  a  country  by  the  amount  of  its  loanable 
capital,  which  represents  the  spare  wealth  of  the  people, 
which  is  deposited  at  interest  in  the  banks. 

In  1840  the  amount  deposited  with  the  various  banks 
was  ^100,000,000  sterling;  at  the  present  time  it  is  esti- 
mated at  ;!^6oo, 000,000.  There  is  more  money  than  the 
banks  can  use,  unless  the  bankers  enlarge  their  range  of 
action,  or  the  public  use  their  money  more  themselves. 
There  are  lots  of  opportunities  where  one  man  could 
help  another,  by  lending  him  money  to  take  a  trade  or 
extend  his  trade,  where  a  banker  dare  not  ;  so  the  money 
lies  idle,  and  unproductive  to  the  nation.  It  may  be 
suggested  that  the  present  is  quite  an  exceptional  time  ; 
that  we  are,  and  have  been,  passing  through  a  period  of 
depression  that  has  perplexed  the  keenest  economical  in- 
quirer. But  if  the  causes  are  as  suggested  by  me,  there 
is  every  reason  to  fear  not  only  the  continuance,  but 
more  frequent    recurrence,    of    these  long  depressions. 


CAPITAL.  195 

There  have  been  times  in  which  the  crises  have  been 
more  acute,  but  never  any  in  which  they  have  been  so 
prolonged  as  from  1874  to  1879.  This  cloud  will  pass 
away,  but  if  we  are  wise,  some  steps  will  be  taken  to 
remove  the  cause.  There  must  be  a  cause,  and  the  same 
should  be  ascertained  and  removed.  One  cause  is  an 
ignorance  of  currency  and  its  laws  by  the  people  gen- 
erally. 

"  Money," — what  a   simple  thing  it  seems  !     Yet  to 
whom  is  explained  its  nature,  its  power  for  good  or  ill, 
at  any  school  in  this  commercial  kingdom  ?    Our  teachers 
want  to  know  more  of  men,  more  of  the  real  world,  less 
of  books.     They  are  not,  as  a  body,  rich,  and  would  be 
able  to  plead  most  forcibly  as  to  the  value  of  money  ; 
although  I  doubt  if  any  man  can  know  the  real  value  of 
money  like  the  tradesman.     And  yet  he  is  so  ignorant  of 
it  that,  like  the  pagan,  he  worships  it  as  his  god,  and  in 
his  eagerness  to  clutch  it,  to  meet  his  own  sore  needs, 
while  failing  to  realize   all  its  powers  for  good  in  the 
world,  he,  alas  !  forgets  its  power  also  for  evil,  and  that 
it  may  be  a  blessing  or  a  curse  to  its  possessor  according 
to  what  he  does  with  it.    The  solid  progress  of  wealth  in 
a  country  can  only  take  place  when  those  of  its  people 
who,  by  frugality,   industry,  inventions,    or    skill,   have 
earned,   produced,    more    than    they  have    consumed — 
"  saved  money,"  as  we  put  it — use  their  judgment  wisely 
in  the  investment  of  the  capital  so  acquired.     All  de- 
positors and  investors   must   recollect   that  in  handing 
over  their  capital  to  an   individual,  company,  or  bank, 
they  are  trusting  their  money  implicitly  to  the  judgment 
and  integrity  of  the  party  they  are  leaving  it  with.     And 
although  no  one  values  banking  more  highly  than  myself, 


196  MONEY. 

I  should  like  to  see  the  people  regard  bankers  more  as 
the  "  book-keepers  of  the  nation,"  and  see  that,  by  the 
general  use  of  banks,  exchange  to  any  extent,  settlements 
to  any  amount,  may  be  effected  without  the  use  of  coin  ; 
regard  banks  as  places  where  money  can  be  borrowed, 
or  bills  be  discounted — as  places  of  security  in  which 
capital  may  be  lodged  till  the  owners  of  it  have  dis- 
covered an  outlet  for  its  employment,  which  I  maintain 
should  be  sought  after  more  by  the  capitalist  and  less  by 
the  banker  than  heretofore. 

PANICS. 

In  "  Lombard  Street  "  Mr.  Walter  Bagehot  says  that 
"any  sudden  event  which  creates  a  great  demand  for 
actual  cash  may  cause,  and  will  tend  to  cause,  a  panic  in 
a  country  where  cash  is  much  economized,  and  where 
debts  payable  on  demand  are  large.  In  such  a  country 
an  immense  credit  rests  on  a  small  cash  reserve,  and  an 
unexpected  and  large  discount  of  that  reserve  may  easily 
break  up  and  shatter  very  much,  if  not  the  whole,  of  that 
credit  ;  hence  the  frequency  of  panics."  The  structure 
rests  upon  credit,  and  the  remedy  seems  so  simple  : 
remove  the  cause  that  shakes  confidence,  that  under- 
mines this  credit.  For  a  people  to  go  on,  subject  to  ruin 
at  any  moment  from  such  accidental  events  as  a  bad 
harvest,  an  apprehension  of  foreign  invasion,  the  sudden 
failure  of  a  great  firm  which  everybody  trusted,  the 
stoppage  of  a  bank,  and  other  similar  events,  is  simply 
ridiculous.  One  thing  is  certain — one  or  the  other  of 
such  events  every  now  and  then  is  sure  to  happen.  Com- 
mon-sense suggests  the  inquiry.  Why  not  prepare  for 
their  coming  ?    The  reply  will  be  in  general  :  There  must 


PANICS.  197 

be  good  and  bad  times,  and  our  industrial  organization  is 
so  complicated  and  so  liable  to  changes,  that  panics 
come,  they  will  tell  you,  by  a  fixed  rule,  every  ten  years 
or  so.  I  deny  that  panics  must  come.  It  is  a  similar 
fallacy  to  saying  that  every  child  must  have  the  measles, 
or  that  every  one  would  have  the  small-pox  unless  vacci- 
nated. Because  A  produces  in  excess  of  what  B  wants, 
or  B  buys  more  than  he  can  pay  for  if  the  same  be  not 
sold,  or  C,  through  the  laxity  of  his  banker,  trades  on 
accommodation  bills,  or  renewal  of  bills,  and  when  a 
crisis  comes,  they  fail  to  get  the  help  hitherto  afforded 
them,  and  by  their  failure  aggravate  the  disease,  is  not 
sufficient  reason  to  show  that  the  disease  ought  to  have 
occurred,  or  that  it  need  be  made  worse,  having  occurred. 
The  times  are  good  when  there  is  no  idle  labor,  no 
capital  lying  dormant,  life  everywhere,  no  sluggishness  ; 
and  as  A  being  occupied,  gets  for  his  labor  or  skill 
money,  and  with  that  money  buys  of  B,  and  so  on,  you 
will  at  once  perceive  how  it  is  that  if  A's  employer  fails, 
A  not  getting  the  money,  cannot  buy  of  B,  and  B  cannot 
buy  of  C,  and  so  the  wheels  of  distribution  are  stopped. 
The  transition  to  the  good  or  the  bad  times  is  sudden 
and  complete  in  a  complex  society  like  ours,  in  which 
every  one  is  dependent  on  the  labor  of  every  one  else  ; 
and  so  the  loss  by  one  spreads  and  multiplies,  and 
affects  all.  This  is  also  noticeable  when  food  is  dear, 
as  the  amount  of  absolute  necessaries  which  a  people 
consumes  cannot  be  much  diminished.  The  additional 
amount  which  has  to  be  spent  on  them  is  so  much  sub- 
tracted from  what  used  to  be  spent  on  other  things. 
After  two  or  three  bad  harvests,  if  corn  be  dear,  every 
industry  is  impoverished,  and  almost  every  one,  by  be- 


198  MONEY. 

coming  poorer,  makes  every  one  else  poorer  also.  All 
trades  are  slack  from  diminished  custom,  and  the  conse- 
quence is — capital  unemployed,  much  idle  labor,  and  less 
production. 

In  England,  during  a  panic,  and  for  some  time  after, 
everybody  is  suspicious  of  everybody ;  the  mistrust 
spreads  ;  but  in  99  cases  out  of  100  there  is  no  founda- 
tion for  the  report,  and  as  soon  as  the  calamity  is  over, 
all  is  forgotten,  and  in  the  same  thoughtless  manner  we 
find  everybody  again  willing  to  trust  and  confide  in 
everybody.  This  is  partly  owing  to  the  speculative  way 
we  have  got  into  of  doing  things,  and  the  up-and-down 
action  of  prices.  In  the  year  preceding  the  panics  of 
1847,  1857,  1866,  1873,  we  find  a  general  rise  in  prices, 
and  in  the  year  succeeding  these  years  a  great  fall. 
After  a  panic  people  are  afraid  of  new  investments,  and 
mistrust  many  of  the  old  ones  ;  so  that  there  soon  ceases 
to  be  an  excess  of  loanable  capital.  But  it  must  always 
be  remembered  that  the  state  of  the  money  market  at 
such  times  is  one  of  stupor  ;  it  is  a  state  of  plethora  from 
inaction,  and  not  from  strength.  There  is  still  that  want 
of  confidence  in  August,  1879,  when  I  am  writing  this, 
which,  should  any  new  causes  of  alarm  spring  up  as  the 
result  of  the  nearly  certain  disastrous  harvest  or  of  con- 
tinued bad  trade,  will  soon  make  money  dear,  and  our 
store  prove  none  too  large  for  our  necessities.  Our  lia- 
bilities are  immense.  The  Bank  of  England  has  no 
power  by  law  to  increase  the  currency,  except  by  an 
increased  deposit  of  bullion.  With  this  "  cast-iron " 
system,  it  is  as  well  to  think  over  a  few  of  the  following 
items,  and  see  the  amount  of  legal  tender  held  by  our 
bankers  against  their  liabilities. 


PANICS. 


190 


Approximate  ?>T\TPMY.m  pf  yj  out  of  it8  of  the  Joint-Stock  Banks  of  Eitf^Iand 
and  Wales  frofn  the  two  Half-  Yearly  Balance-Sheets,  as  published  in  tfie 
'^Economist,"  October  ig,   1878;  and  of  74  out  ijg.  May  77,  iSjg. 

LIABILITIES. 


Joint-Stock   Banks  of 

England  and  Wales. 

(73  out  of  118.) 


For  the    half-year    end-  I 
ing  June  30,  1878  .  .  .    ) 


Joint-Stock  Banks  of  Scot- 
land      

Add  City   of  Glasgow,    I 
failed  Oct.    2,  1878  .  .   ) 


Joint-Stock      Banks     of  ) 
I  reland  (on  44  per  cent. )  ) 


3 


fc 


p. 
a 
U 


£ 

40,599<420 


9,045,780 
1,000,000 


10,045,780 


2,950,000 


'>'-3 

•a       --; 

3    =    2 


£ 

I7.S301345 


4,857,882 

592,096 


5,449,978 


1,374,141 


c 


o 

2; 


£ 
27,390,448 


5,509,191 
710,252 


6,219,443 


1,977,508 


.2  c 


0*— * 


£ 
12,508,912 


6,687,360 


3 

u  «,• 

eg  u 

O 


235,392>°87 


69,896,946 


1,488,24s         8,102,001 


8,175,60s  I     77,998,947 


86,620 


.0 


o 
H 


333,421,212 


95,997,159 
11,892,594 


107,889,753 


18,736,521    25,124,790 


Joint-Stock 

Banks  of  England 

and  Wales. 

(74  out  of  119.) 

d 

3 
1 

■o 

"n 

'p. 
a 
0 

Reserve  Fund, Divi- 
dend,   and    Undi- 
vided Profits. 

c 
0 

u 

k. 

0 

s 

ID 
0 
"4, 

Acceptance      Lia- 
bilities      (where 
stated). 

Liabilities  on   Bills 
in        Circulation, 
Credits,     Drafts, 
Rebate,  etc. 

3 

•o| 

•i 

a  c 

0 

^or  the  half-year 
ndingDec.31,1878  ( 

£ 

40,426,932 

£ 
17,138,431 

£ 

30,134,904 

£ 
15,378,376 

£ 

2,644,598 

228,902,459 

334,625,700 

oint-Stock  Banks  1 
of  Scotland  .  .     j 

8,896,500 

4,907,113 

5,568,656 

5,137,947 

1,285,152 

67.423,834 

93,219.202 

oint-Stock  Banks  | 
of  Ireland  (on  44  >• 
per  cent.)  ...      ) 

2,950,000 

1,396,420 

1,906,911 

24,871 

80,119 

18,199,979 

24,558,300 

COLONIAL  JOINT-STOCK    BANKS   WITH    LONDON   OFFICE. 

Liiabilities,  June  30,  1878  ....... 

Dash  in  hand  and  money  at  call  ....... 

Liabilities,  December  31,  1878  ....... 

i^ash  in  hand  and  money  at  call  ....... 

FOREIGN   JOINT-STOCK    BANKS  WITH   LONDON   OFFICES. 

Liabilities,  June  30,  1878  ....... 

3ash  in  hand  and  money  at  call  ....... 

Liabilities,  December  31,  1878  ....... 

i^ash  in  hand  and  money  at  call  ....... 


^149,671,767 
22,756,594 

156,305.379 
21,657,180 


;£6o,026,998 

7.57«,763 

59,466,147 

8,128,227 


200 


MONE  y. 


ASSETS. 


Joint-Stock    Banks 
of  England  and 

Wales. 
(73  out  of  118.) 

T3 

c    . 

K  " 

.5  <u 

c 

-c  0 

u 

Investments,  Gov- 
ernment    Stocks, 
etc.,  where  stated 
separately. 

Bills      Receivable 
and    Discounted, 
Overdrawn      Ac- 
counts, Loans  and 
Other  Securities. 

•0 

c 

be  I. 
c-o 

pa 

Total  Assets 

For  the  half-year  j 
ending  June  30,  > 
1878     .     .     .     .) 

£ 

61,334,223 

£ 

57,318,003 

£ 

210,393,129 

£ 

4.375.857 

£ 

333,421,212 

Joint-Stock   Banks 
of  Scotland     .     . 

AddCityofGlas-i 
gow,  failed  Oc-  r 
tober  2, 1878    .    ) 

5.497.946 
845,963 

19.356,715 
2,296,840 

69,783,832 
8,484,467 

1,358,666 
265,324 

95.997.159 
11,892,594 

6.343.9°9 

21,653.555 

78,268,299 

1,623,990 

107,889,753 

Joint-Stock       1 

Banks  of  Ireland  >■ 

(on  44  per  cent.)  ) 

3,267,041 

2,622,071 

18,647,206 

588,472 

25.124.790 

Joint-Stock  Banks 
of  England  and 

Wales. 
(74  out  of  119.) 

c    . 

K  " 

■"  c 
j=  0 

0 

Investments,  Gov- 
ernment   Stocks, 
etc.,  where  stated 
separately. 

-5 

C    UJ 

Advances,  _  Loans, 
Bills      Discount- 
ed,      Overdrawn 
Accounts,        and 
Other  Securities. 

Buildings  and  Sun- 
dries   (Including 
Cover  for  Accept- 
ances, as  in  Col.  4) 

Total  Assets 

Forthe'half-year  1 
ending  Decern-  > 
ber  31,  1878     .    ) 

£ 

71,851,492 

£ 
56,330,176 

186,610,511 

£ 
19.833.521 

£ 

334.625,700 

Joint-Stock      | 

Banks    of   Scot-  >- 

land  .     .     .     .    ) 

5.348.584 

17,228,405 

62,932,553 

7,709,660 

93,219,202 

Joint-Stock     | 
Banks  of  Ireland  > 
(on  44  per  cent.)  ) 

3,516.368 

2,627,712 

I 

7.725.637 

688,583 

24,558,300 

PANICS. 


201 


ASSETS.— Continued. 


Savings'-Bank  Returns. 

At  May  3,  1879. 

At   Corresponding 

Period  Last 

Month. 

At   Corresponding 

Period  Last 

Year. 

Total  amount  at  the  credit 

of: 
The  Fund  for  the  Banks  1 

for  Savings     .     .     .     .    f 
The  Post-Oflfice  Savings-  i 

Banks  Fund  .     .     .     .    ) 

£.          s.   d. 

43,130,940    0    I 
31,869,877  17    5 

£,          s.   d. 

43i27Si992     6     2 
31,695,146  17     4 

£.        s.  d. 

43.7001496    8    0 
30,224,336  II     8 

Total 

75,000,817  17    6 

741971.139     3     6 

73,924,832  19    8 

P.  S.— For  this  large  sum  no  cash  whatever  is  held  ;  it  is  all  invested  in  securities 
of  the  best  kind,  still  liable  to  be  asked  for. 


If  you  compare  the  items  that  make  up  the  assets,  you 
will  observe  how  small  a  proportion  the  cash  in  hand, 
etc.,  bears  to  the  total  liabilities  ;  on  an  average,  it  is 
about  one  sixth.  The  magnitude  of  the  liabilities  shows 
how  susceptible  to  the  least  whisper  of  suspicion  the 
money  market  must  be.  And  you  will  see  the  import- 
ance of  the  "  currency  question,"  also  the  forethought 
and  caution  necessary  when  in  a  short  time,  as  credit 
improves  and  trade  revives,  provisions  get  back  to  their 
usual  price,  or  something  happens  to  give  one  of  the 
great  industries  a  push  onwards,  and  the  country  will 
seem  to  leap  forward  into  prosperity  as  if  by  magic. 
Theft  is  the  time  for  prudence  to  step  in,  for  the  brain  to 
ponder  over  the  causes  of  this  great  change.  Does  it 
arise  from  a  greater  quantity  being  produced,  generally, 
of  the  right  articles  ?  Because,  if  so,  the  basis  is  good, 
the  increased  demand  being  to  supply  in  larger  quantity, 
and  with  increased  rapidity,  the  wants  of  men  profitably 
employed.  Or  is  it  only  based  on  some  general  advance 
in  prices?  for,  if  so,  it  is  only  an  imaginary,  a  fictitious 


202  MONE  Y. 

prosperity.  A  general  rise  of  prices  is  only  a  rise  in 
name  ;  it  is  not  a  real  increase  of  the  national  wealth  or 
capital.  Where  is  the  benefit  if  what  one  gains  on  what 
he  sells,  he  loses  in  the  increased  price  charged  for  what 
he  buys  ?  "  Money  "  is  but  the  medium  of  exchange. 
You  are  no  richer  if  what  you  sell  be  exchanged  for  two 
sovereigns,  instead  of  one,  should  the  two  sovereigns 
only  enable  you  to  buy  as  much  and  no  more  than  one 
would  have  done.  It  is  singular  how  pleased  nearly  all 
sellers  are  when  prices  go  up.  Take  the  American  war. 
Cotton  goods  went  up  to  nearly  double  their  price.  In 
selling  a  "  sixpenny  "  cotton  for  ninepence,  the  seller 
thought  he  had  done  well,  made  a  "  large  profit  "  ;  forget- 
ting that  with  the  ninepence  he  could  only  replace  as 
much  cotton.  In  reality  he  was  no  7'icher ;  his  real 
wealth  was  still  the  same,  "  valued  in  cotton  "  ;  but  the 
higher  prices  made  his  capital  seem  larger.  More 
money  is  needed  to  do  the  same  amount  of  trade,  and 
money  becomes  dearer.  It  is  no  gain  to  the  one  class  ; 
and  the  higher  prices  are  really  a  reduction  in  all 
"fixed  "  incomes,  whose  money  will  obtain  for  them  in 
exchange  less  food  than  heretofore.  Nevertheless,  most 
people  like  "  high  prices  "  ;  in  their  ignorance  of  the 
subject,  they  think  with  40X.  they  must  be  richer  than  if 
they  had  only  20s.;  forgetting  altogether  the  essential 
point,  that  the  value  of  the  money  depends  on  what  it 
will  exchange  for,  and  therefore  increased  price  or  wage 
is  useless,  unless  it  will  exchange  for  more  than  the 
lesser  price  did  when  all  goods  were  cheaper.  "  Increased 
production  "  is  the  only  policy,  each  one  contributing  to 
the  general  stock,  and  receiving  in  exchange  more  to 
consume.     Getting  higher  prices  for  the  thing  produced 


PANICS.  203 

may  be  beneficial  to  the  individual,  if  others  do  not  ask 
the  proportionately  higher  prices  for  their  products  ;  but 
increased  production,  and  all  produced  at  the  cheapest 
cost,  is  the  only  basis  for  the  national  welfare  and  pros- 
perity, for  really  good  times.  The  "  good  times "  of 
high  prices  lead  to  mad  speculations,  reckless  over- 
trading. It  is  strange  how  for  a  time  people  seem  care- 
less enough  to  believe  in  any  thing  that  promises  them  a 
good  interest  ;  but  adversity  is  no  sooner  seen,  a  few  of 
the  schemes  are  no  sooner  found  to  be  worthless,  than 
begins  again  a  senseless  panic;  people  are  as  mad  to  sell 
as  they  were  to  buy,  bubble  after  bubble  bursts,  confi- 
dence is  gone.  And  until  mankind  will  think  more,  and 
not  be  led  by  others,  there  must  be  a  recurrence  of  these 
ills.  But  they  do  much  harm,  weakening  credit  ;  and  a 
remedy  should  be  devised  to  stop  the  innocent  from  suf- 
fering, as  they  do  now,  with  the  guilty. 

The  magnitude  of  our  commerce,  and  the  number  and 
magnitude  of  the  banks  which  depend  on  the  Bank  of 
England,  are  undeniable.  In  1857  the  loans  on  "private 
securities "  by  the  Bank  of  England  increased  from 
^^20,404,000  to  ^31,350,000,  and  in  1866  from  p^i8,- 
507,000  to  ^33,447,000,  because  of  the  larger  number  of 
people  under  great  liabilities  here.  So,  when  prosperity 
seems  at  its  height,  by  our  present  system  of  banking, 
directly  the  slightest  breath  of  adversity  is  apparent,  the 
whole  commercial  and  monetary  structure  is  ripe  for  a 
panic.  And  for  this  reason  there  has  been  a  great  ex- 
pansion of  all  the  industries,  upon  the  system  of  credit, 
— credit,  that  symbol  of  man's  faith  in  man  ;  but  all  at 
once,  when  the  ship  is  at  full  sail,  and  every  shred  of 
canvas  is  in  use,  every  timber  strained  to    the   utmost 


204  MONE  Y. 

tension,    there  comes   a   whisper  of  danger ;  there  has 
been  found  a  leakage.     Man's  trust  in  his  fellow-men  is 
weakened  by   some   rumor   or   stoppage  ;  a   revolution 
takes  place  ;  all  are  eager  to  fly  from  the  wreck,  to  save 
themselves  from  ruin  ;  and  in  their  mad  eagerness,  they 
damage  our  commercial  system,  and  one  day  will  destroy 
it,  unless  steps  be  taken  to   avert  these  terrible  catas- 
trophes, these  social  shipwrecks.     They  must  inevitably 
occur  again,  if  we  persist  in  the  "  finality  "  doctrine  and 
refuse  to   remember  that,    since    1844,    thirty-six   years 
have  passed — a  period  remarkable  for  its  material  prog- 
ress  and   banking   development.      Our   people   do   not 
hoard  their  money  ;  they  are  bolder  with   it  than  any 
other  people.     If  they  do  not  lend   it  personally,  they 
deposit  it  with  bankers,  and  borrowers  go  to  them  for  it. 
The  same  sum  scattered  in  tens  and  fifties  through   a 
whole  nation  is  no  power  at  all.     No  one  knows  where 
to  find  or  whom  to  ask  for  it.     It  is  the  concentration  of 
money  in  banks  that  has  made   all   people  in  want  of 
money  come  to  us  for  it ;  and  the  country  of  banks  by 
this  means  aids  in  the  carrying  out  vast  works  which, 
but  for  that  aid,  would  never  have  been  planned.     It  is 
our  "banking  system,"  the  faith  of  our  people  in  "de- 
positing" their  money  in  the  banks,  that  has  made  our 
money  market  so  exceedingly  rich,  so  much  beyond  that 
of  other  countries.     With  such  a  responsibility  hanging 
over  us,  the  "  masterly  inactivity  "  doctrine  is  only  ex- 
cusable because  of  the  people's  utter  ignorance  of  the 
subject. 

A  panic  is  spread  as  follows  :  The  bank  reserve  is 
getting  low  ;  trade  in  England  is  carried  on  with  bor- 
rowed money  ;  a  panic  takes  place  ;  credit  is  shaken ; 


PANICS.  205 

people  are  not  content  with  the  "  promise  to  pay,"  they 
want  to  be  paid.  The  banks,  to  protect  themselves,  and 
each  fearing  a  run,  refuse  to  discount,  except  to  their 
own  customers,  and  are  less  willing  to  do  this  than  here- 
tofore. The  manufacturers  and  merchants  are  under 
serious  liabilities,  and  even  if  their  books  show  40.?.  in 
the  J[^,  must  stop  payment,  unless  the  banks  will  help 
them.  They  cannot  by  our  present  system  ;  so  houses 
that  are  considered  good  fail ;  the  panic  spreads,  and 
carries  in  its  train  misery  and  ruin,  until  matters  get  so 
serious  that  the  act  is  suspended,  and  the  Bank  of  Eng- 
land does  at  last  what  should  be  done  at  first — leiid  freely 
to  all  able  to  deposit  with  it  security  for  the  same.  But 
what  a  satire  upon  us  as  a  "practical  people"!  To 
satisfy  the  crotchets  of  certain  monetary  doctors,  every 
eight  or  ten  years  we  permit  this  modern  plague  to  visit 
us,  and  instead  of  adopting  the  modern  view,  of  strength- 
ening the  patient  at  the  first  symptoms,  thus  checking 
the  disease,  we  allow  it  to  weaken,  kill  a  lot  of  patients, 
and  spread  into  healthy  districts,  instead  of  stamping  it 
out  at  the  first  sign  ;  or,  better  still,  having  such  a  sys- 
tem in  operation  that  the  disease  will  have  no  chance  of 
a  victim.  What  is  the  disease  ?  A  ravenous  monster 
that  will  only  be  satisfied  with  "money."  Why  such  an 
insane  desire  for  it  ?  Because  of  limiting  your  money  to 
some  fixed  sum — one  of  the  most  foolish  things  ever 
done  by  a  wise  man.  Let  the  principle  upon  which  the 
same  "  limited  "  sum  is  based  be  extended  to  meet  the 
wants  of  1880,  and  not  restrict  us,  as  if  our  operations 
were  to  be  confined  to  the  ideas  of  1844.  Let  the  act  be 
altered,  and  let  the  people  know  that  money — or  what 
they  will  take  as  willingly  as  money,  Bank  of  England 


2o6  MONE  V. 

notes — can  be  had  ad  libitum.  But  how  is  this  to  be 
done  ?  By  the  government  alone  having  the  power  to 
issue  notes  ;  by  letting  every  bank,  or  any  one,  have 
these  "notes"  by  depositing  the  requisite  security  for 
the  same  ;  placing  all  banks  upon  an  equality,  each 
keeping  his  own  reserve,  as  if  its  life  and  credit  depended 
on  itself  ;  government  not  restricted  to  one  bank,  but 
having  the  choice  of  banks.  At  present  the  Chancellor 
of  the  Exchequer,  when  borrowing  on  deficiency  bills,  is 
confined  to  a  single  bank,  which  can  fix  its  own  charge  ; 
whereas  he  should  be  able  to  borrow  of  the  cheapest  out 
of  many  competing  banks.  The  nation  would  be  helped 
by  a  diffused  system — "  national  notes,"  freely  issued  by 
banks  all  over  the  kingdom  ;  and  in  this  simple  manner 
we  should  get  a  large  revenue  by  charging  stamp  duty 
for  every  note,  and  also  prevent  panics,  by  giving  our 
system  what  it  needs — confidence  in  the  mind  of  every 
banker  that  he  can  obtain  "  money  "  to  any  extent  to 
supply  the  needs  of  all  who  may  apply  for  it,  if  he  has 
the  requisite  security  to  justify  his  having  the  same. 
The  more  you  study  the  subject,  the  more  you  know 
about  "  money  "  and  "  panics,"  the  more  you  will  become 
convinced  that  it  is  not  real  scarcity  of  money,  but  a 
general  dread,  a  universal  mistrust,  an  apprehension 
more  or  less  strong,  in  the  mind  of  every  banker,  manu- 
facturer, merchant,  and  trader,  that  makes  all  anxious  to 
secure  all  the  money  they  can,  and  to  keep  it  for  fear  of 
not  being  able  to  get  it  in  case  of  need.  If  this  be  so, 
by  removing  the  dread,  we  get  rid  of  the  cause,  and  the 
disease  will  die  a  natural  death. 

Do  not  misunderstand  me  ;  no  advances  need  be  made 
upon  which  there  is  any  risk.    To  refuse  bad  bills  or  bad 


PANICS.  207 

securities  never  created  a  panic,  or  made  one  worse  ;  the 
"  unsound  "  people,  the  amount  of  bad  business,  being 
but  a  small  portion.  To  prevent  or  check  a  panic,  it  is 
only  needful  that  the  great  majority,  the  "sound  "  peo- 
ple, are  protected  from  anxiety,  loss,  or  ruin  by  a  system 
that  will  give  "  money  "  to  all  such  people  as  have  good 
security  to  offer  for  it.  Even  under  the  present  system, 
in  these  circumstances,  the  wiser  policy  is  for  the  banks 
to  be  "  more  liberal  "  than  usual,  instead  of  the  reverse  ; 
as  when  it  is  rumored  about  that  the  Bank  of  England, 
or  other  banks,  are  refusing  good  and  usually  convertible 
securities,  the  panic  must  become  worse  and  worse,  as  no 
one  feels  secure.  What  is  wanted,  and  what  is  necessary 
to  stop  a  panic,  is  to  diffuse  the  impression  that  though 
money  may  be  dear,  still  money  is  to  be  had.  If  people 
were  convinced  that  they  could  have  money  if  they 
waited  till  they  wanted  it  in  the  ordinary  way  of  their 
business,  and  that  ruin  is  not  coming,  they  would  cease 
to  run  in  such  a  mad  way  for  it. 

You  may  lend  a  great  deal,  yet  not  give  the  necessary 
confidence.  Bankers  should  see  how  essential  this  is  for 
their  own  security  ;  the  bold  policy  is  the  only  safe  one. 
Lend  as  if  you  have  an  illimitable  stock  of  money.  In 
"  Lombard  Street,"  Mr.  Bagehot  says  :  "  Lending  freely 
is  the  best  method  to  check  the  demand.  The  brave 
policy,  lending  on  every  kind  of  current  security,  even 
on  securities  upon  which  money  is  not  ordinarily  lent,  is 
more  likely  to  get  the  banker  higher  praise  than  being 
timid,  exhibiting  a  nervous  caution,  refusing  to  le7id  on 
this  or  t/tat,  that  hitherto  has  been  taken  without  demur. 
Take  the  panic  of  1825.  The  Bank  of  England  tried  every 
means  to  restrict  its  advances;  the  reserve  being  very  small. 


208  MONE  Y. 

it  endeavored  to  protect  that  reserve  by  lending  as  little  as 
possible.  The  result  was  a  period  of  frantic  and  almost 
inconceivable  violence  ;  scarcely  any  one  knew  whom  to 
trust  ;  credit  was  almost  suspended  ;  '  the  country  was,' 
as  Mr.  Huskisson  expressed  it,  'within  twenty-four  hours 
of  a  state  of  barter.'  The  government  were  pressed  to 
issue  exchequer  bills,  but  Sir  Robert  Peel  refused,  and 
the  bank  was  ordered  to  issue  their  notes  on  the  security 
of  goods,  instead  of  issuing  them  on  exchequer  bills, 
such  bills  being  themselves  issued  on  that  security. 
They  reluctantly  consented,  and  the  principle  of  such 
action  being  sound,  the  success  was  complete.  As  they 
lent  money  by  every  possible  means,  and  upon  every 
kind  of  security,  matters  settled  down,  and  there  was  no 
real  panic  in  the  money  market  till  1847.  In  1847,  1857, 
1866,  the  bank  made  very  large  advances,  and  more 
readily  than  it  did  in  1825.  But  there  is  still  no  certainty 
as  to  what  the  Bank  of  England  considers  '  good  securi- 
ties.' "  Mr.  Bagehot  doubts  if  the  Bank  of  England  in 
a  panic  would  advance  on  railway  debenture  stock,  and 
many  other  such  securities.  It  should  be  clearly  under- 
stood that  money  is  to  be  had  upon  all  genuine  securities. 
The  amount  of  the  advance,  of  course,  must  be  left  to  the 
discretion  of  the  banker.  But  the  principle  of  lending 
should  be  clearly  defined,  for  all  banks  to  lend  on  every 
kind  of  security,  irrespective  of  its  nature,  always  assuming 
the  security  to  be  good,  and  more  freely,  if  any  difference, 
duri?tg  a  panic.  The  certainty  of  getting  money  would 
be  a  great  relief  to  the  minds  of  manufacturers  and  mer- 
chants, as  industrial  operations  would  not  be  checked 
suddenly,  and  goods  sold  for  what  they  will  fetch,  as 
now  ;    for   the    experience    of   the    past   justifies    us   in 


PANICS.  209 

assuming  that  the  "  extra  "  demand  for  money  would 
occur  less  frequently,  and  certainly  with  less  persistency, 
than  heretofore.  The  best  palliative  to  a  panic  is  con- 
fidence that  the  money  is  to  be  had  if  wanted  ;  and,  to 
ensure  "  liberal  "  action,  we  want  the  power  to  lend  to  be 
given  to  every  banker  ;  whereas,  in  reality,  practically, 
the  Bank  of  England,  during  a  panic,  is  the  sole  lender. 
Therefore,  until  the  Act  of  1844  is  altered,  we  must  be 
liable  to  crises  ;  and  such  crises  will  be  a  terror  to  us  all, 
and  national  bankruptcy  only  averted,  as  heretofore,  by 
the  government  at  the  last  moment  suspending  the  oper- 
ations of  the  Currency  Act,  which,  instead  of  preventing, 
as  it  easily  might,  money  panics — viz.,  the  fear  of  not 
being  able  to  get  money — increases  the  mischief,  from 
its  policy  of  limitation. 

In  the  Appendix  to  "  Lombard  Street,"  Mr.  Alderman 
Salomons,  in  his  reply  to  the  Chairman  of  the  House  of 
Commons'  Select  Committee,  in  1858,  confirms  this  view, 
although  he  made  the  statement  to  prove  the  contrary  : 
1 146. — The  Chairman  :  "  The  effect  upon  the  London 
and  Westminster  Bank  of  the  pressure  in  November, 
1857,  was,  I  presume,  to  induce  you  to  increase  your  re- 
serve in  your  own  hands,  and  also  to  increase  your  de- 
posits with  the  Bank  of  England  ?  "  "  Yes,  that  was  so  ; 
but  I  wish  to  tell  the  committee  that  that  was  done 
almost  entirely  by  allowing  the  bills  of  exchange  which 
we  held  to  mature,  and  not  by  raising  any  money  or 
curtailing  our  accommodation  to  our  customers."  Yet 
Alderman  Salomons  admits  that  between  the  nth  of 
November  and  the  31st  December,  1857,  the  bank 
strengthened  itself  by  allowing  bills  to  the  value  of 
;^5,ooo,ooo  to  mature  ;  that  is   to  say,  they  added  to 


2IO  MONEY. 

their  own  reserve  by  "  not  discounting  for  bill  brokers, 
as  heretofore,  to  the  extent  of  five  millions  of  money  in 
seven  weeks," — a  most  serious  withdrawal  of  accommo- 
dation from  the  commercial  world  by  one  bank.  Mr. 
Salomons  fails  to  see,  by  allowing  bills  to  mature — re- 
maining quiescent,  as  he  puts  it — to  enable  the  bank  to 
meet  any  demand  that  might  be  made  on  it,  that  virtually, 
by  this  action,  instead  of  helping  the  commercial  world, 
this  bank  withdrew  from  commerce  its  usual  support  to 
the  extent  of  five  millions  of  money.  Mr.  Salomons  in 
his  evidence  admitted  that  the  opinion  was  "  thoroughly 
engraved  in  the  minds  of  the  commercial  world,  that 
whenever  you  have  good  security  it  ought  to  be  con- 
vertible at  the  Bank  of  England  in  some  shape  or  way  ; 
and  he  said  he  had  great  doubt  indeed  whether  the  bank 
can  ever  take  a  position  to  refuse  to  assist  persons  who 
have  good  commercial  securities  to  offer."  There  can- 
not be  two  opinions  upon  this  subject.  To  save  individ- 
uals from  ruin,  to  save  the  nation  from  suffering,  to  pro- 
tect the  capital  of  the  kingdom  from  unnecessary  loss,  a 
change  of  owners,  manufacturers  and  tradesmen  having 
good  bills  to  offer  for  discount,  or  good  security  to  borrow 
upon  temporarily,  ought  to  be  free  from  any  apprehen- 
sion, free  from  any  doubt,  that  at  their  own  bankers,  or 
at  the  Bank  of  England,  or  in  some  way,  there  are 
facilities  and  means  for  discounting  the  bills,  or  getting 
the  "  money  "  needed  to  carry  on  the  commerce  of  the 
country. 

The  limitation  of  the  Bank  Act  must  be  removed. 
There  is  no  reason  why  the  limit  should  be  fifteen  mil- 
lions ;  whilst  there  is  every  reason  why  the  act  should 
be  altered  and  the  sum  enlarged.     There  is  no  necessity 


PANICS.  211 

for  a  fixed  sum.  All  we  want  is  security  for  the  notes 
issued — the  same  as  now  enforced  by  the  act,  and  sim- 
ilar to  the  prudent  action  of  the  Metropolitan  Board  of 
Works,  which,  collecting  a  great  revenue  in  London,  has 
an  account  at  the  London  and  Westminster  Bank,  for 
which  that  bank  makes  a  deposit  of  consols  as  a  security. 
It  is  a  great  error  of  judgment  to  rely  upon  suspension 
of  the  act  to  save  us  ;  such  actions  damage  the  national 
credit.  Besides,  why  should  we  repeat  the  risks  of  the 
past?  Mr.  Pitt,  in  1797,  feared  ^^''^^  he  might  not  be 
able  to  obtain  sufficient  si)ecic  for  foreign  payments,  in 
consequence  of  the  low  state  of  the  bank  reserve,  and  he 
therefore  required  the  bank  not  to  pay  in  cash — said  they 
must  not  ;  and  from  1797  to  1819,  the  period  of  the 
bank  restriction,  as  it  is  called,  the  bank  did  not  pay 
its  notes  in  gold — in  reality,  a  suspension  of  payment  ; 
which  was  nearly  repeated  in  1825,  when  only  coin  was  a 
legal  tender,  and  the  bank  had  reduced  its  reserve  to 
^^1,027,000.  Except  for  the  "  letter  of  licence  "  by  the 
government  in  1847,  1857,  1866,  it  is  doubtful  if  they 
could  have  kept  on  ;  although  no  one  doubted  ultimately 
that  the  Bank  of  England  would  always  pay  20^-.  in  the 
^  to  every  creditor  and  shareholder  ;  but  the  law  is, 
that  it  pay  its  notes  in  gold  on  demafid.  On  Nov.  13, 
1857,  however,  the  banking  reserve  was  reduced  to 
;^95 7,000,  and  the  bank  only  kept  open  through  the  sus- 
pension of  the  act,  and  the  "  letters  of  licence  "  from  the 
government  enabling  them  to  borrow  from  the  currency 
reserve,  which  was  full,  in  aid  of  the  banking  reserve, 
which  was  nearly  empty.  This  crisis  taught  the  directors 
a  lesson,  and  they  have  since  taken  the  proper  steps  to 
avert  such  a  catastrophe — viz.,  raising  the  bank  rate  in 


2 1 2  MONE  Y. 

good  time,  and  adopting  Mr.  Goschen's  recommendation 
to  raise  the  rate  by  steps  of  one  per  cent,  at  a  time  when 
the  object  of  the  rise  was  to  affect  the  foreign  exchanges. 
The  elevation  of  the  rate  of  interest  is  the  bank's  safety- 
valve.  It  has  a  double  action  ;  it  lessens  the  demand 
for,  and  increases  the  supply  of,  money  ;  and  experience 
has  proved  that  loanable  capital,  like  every  other  com- 
modity, comes  where  there  is  most  need  of  it,  where  it 
will  be  best  paid  for.  When  the  bank  raises  its  rates,  or 
as  soon  as  the  rate  of  interest  shows  that  it  can  be  done 
profitably,  continental  bankers  and  others  instantly  send 
large  sums  here. 

I  quite  agree  with  Mr.  Bagehot  that  what  we  want  is 
the  "  national  "  system — government  to  be  the  "  issue 
department,"  and  to  leave  bankers  alone  ;  so  that  instead 
of,  as  now,  relying  on  one  bank,  there  would  be  many 
banks  of  equal  or  not  altogether  unequal  size.  In  all 
other  trades  competition  brings  the  traders  to  a  rough 
approximate  equality.  Banking  should  be  free,  a  repub- 
lic with  many  competitors  of  a  size  or  sizes  suitable  to 
the  business.  At  present  we  have  a  constitutional  mon- 
archy, one  it  would  be  unwise  to  overthrow  ;  as  the 
credit  of  the  Bank  of  England  has  grown  with  its  growth, 
and  could  not  be  reconstructed.  But  it  would  be  wise 
of  us  to  gradually  prepare  a  system,  so  that  the  banks 
would  keep  their  own  reserves,  and  rely  upon  them- 
selves, instead  of  leaning  upon  the  Bank  of  England, 
which  in  its  turn  depends  on  government  aid  for  help  in 
a  crisis. 

In  a  "  panic  "  we  forgot  what  paper  money  was  intro- 
duced for — viz.,  to  take  the  place  of  coin.  The  subject 
of  money  not  being  generally  understood,  we  have  not 


INDIVIDUAL    SUCCESS.  21 3 

wisdom  enough  for  the  occasion,  and  therefore  fail  to 
make  use  of  our  credit  system,  as  the  legitimate  means 
to  compensate  for  the  temporary  absence  of,  or  increased 
demand  for,  gold.  Panics  do  not  arise  from  the  want  of 
gold,  but  from  the  limitation  and  restriction  of  the 
amount  of  the  ordinary  accepted  currency  of  the  kingdom 
at  those  periodical  junctures  when  the  nation  requires 
more  of  the  circulating  medium  ;  and  it  can  be  proved 
that  a  larger  issue  of  bank  notes  at  these  periods  stops 
the  distrust,  the  blind  fear,  that  creates  panics.  The 
Currency  Act  should  be  altered  so  as  to  give  confidence 
and  remove  the  senseless  fears  of  timid,  thoughtless  peo- 
ple, and  thus  prevent  panics,  and  the  ruin  that  accom- 
panies them. 

INDIVIDUAL   SUCCESS. 

Are  there  causes  of  success  and  failure  ?  Can  money 
be  made  by  earning  it,  by  saving  it,  by  wisely  investing 
it  ?  Yes  ;  there  is  no  higher  mission  than  to  teach  men, 
all  men,  the  practical  lesson  that  if  they  want  any  thing 
in  this  world  they  must  learn  how  to  earn  it.  To  acquire 
excellence  in  any  thing,  you  must  work — work  persist- 
ently, unceasingly.  There  is  an  idea  general  enough 
that  talent  is  best  left  alone  to  sink  or  swim,  but  I  fear 
many  sink  who  might  be  worth  the  saving.  The  soul 
may  perish  from  a  sheer  lack  of  a  spoonful  of  soup  in 
the  mouth.  Look  at  the  vast  mass  of  people  in  every 
country  under  the  sun,  century  after  century,  struggling 
to  live  ;  born,  as  it  were,  only  to  know  the  pangs  of  life 
and  death,  and  of  nothing  more.  Mcthinks  that  human 
life  is,  after  all,  like  a  human  body  with  a  fair  and 
smiling  face,  but  all  the  limbs  ulcered  and  cramped  and 


214  MONEY. 

racked  with    pain.     No    surgery  of  statecraft  has  ever 
known  how  to  keep  the  fair  head  erect,  yet  give  the 
trunk  and  the  limbs  health.    Why  ?    Because  the  attempt 
has  never  been  made  earnestly  ;  for  the  nation  could,  as 
easily  as  the  individual,  weather  all  difficulties  if  they 
had  pluck  and  patience  enough  to  overcome  them.     But 
it  is  of  the  utmost  importance  that  men  should  see  that 
the  fault  is  in  themselves,  and  that  our  teachers  should 
perceive  that  what  is  wanted  is  a  motive  power  to  draw 
out  what  is  good  in  people  ;  for  there  is   a  great  deal 
more  good  than  is  generally  supposed.     Why  is  it  that 
men  remain  pigmies  when  they  might  be  giants  ?  "  Man, 
do  thy  own  work,  and  know  thyself  "  (Plato).    To  make 
money,  to  be  successful,  it  must  be  taught  as  a  fact  that 
to  achieve  success  in  any  calling,  every  man,  each  in  his 
place,  must  put  his  hand  to  the  work  as  if  he  was  work- 
ing for  his  very  life,  and  from  a  sense  of  honor  built 
upon  self-reliance  and  self-help.     To  succeed,  one  must 
earnestly  strive,  as  a  trader,  not  for  the  mere  gain, — as  a 
doctor,  not  for  the  fees, — as  a  statesman,  not  for  popular- 
ity,— but  from  the  sincere  desire  and  firm  resolution  to 
succeed  in  doing  your  duty  in  your  calling  ;  earnestly 
striving  at  the  same  time  for  the  welfare  of  others.     Is 
there   a   more  miserable  object  than  the  man  who  has 
become  so  absorbed  in  the  desire  for  wealth,  so  selfish 
in  his  views,  that  he  is  the  slave  of  his  own  selfish  desires, 
thereby  depriving  himself  of  all  the  higher  pleasures  his 
nature  is  capable  of  ?     A  real  man  will  toil  amid  obsta- 
cles, struggle  against  impediments,  allow  neither  wrath 
nor  despair  to  slacken   his  energy — determined  to  suc- 
ceed.    In  fighting  against  a  false  system,  or  in  denoun- 
cing the  blighting  curse  of  an  unsound  practice,  one  needs 


INDIVIDUAL    SUCCESS.  21$ 

the  tenacity  and  will  of  Hercules  to  cleanse  the  Augean 
stable.  Such  men  are  upheld  by  their  disgust  at  the 
folly,  as  well  as  foulness,  of  any  immoral  system  that,  to 
their  clear  minds,  is  as  loathing  as  it  is  unnecessary, — 
upheld  because  their  efforts  are  not  for  the  mere  pursuit 
of  gain,  but  a  desire  for  the  triumph  of  truth  and  virtue. 
"  A  wise  man  should  have  money  in  his  head,  but  not  in 
his  heart  "  (Swift).  Talents  are  like  vigor  of  body, — 
they  demand  to  be  used.  You  need  not  desire  to  be 
rich,  but  all  need  to  live  ;  so  all  should  be  able  to  earn 
a  competence,  and  be  prudent  enough  to  provide  for  a 
rainy  day.  The  sluggish  brook,  gathering  its  stagnant 
waters  from  miry  swamps  and  malarious  quagmires, 
cannot  be  blamed  because  it  is  not  a  strong,  sparkling, 
enterprising  river,  giving  joy  wheresoever  it  flows.  To 
improve  the  brook,  we  must  remove  the  cause  of  its 
sluggishness,  and  give  vitality  to  its  waters.  So,  to  get 
men  from  being  the  unstable,  dawdling,  shallow-minded 
beings  they  are,  we  must  give  them  an  interest  in  life 
that  will  move  within  them  the  spirit  to  be  better,  and 
have  nobler  objects  and  aims  in  life  than  heretofore. 
Once  set  the  ball  rolling,  who  can  say  when  it  will  stop  ? 
Men  will  be  led  to  follow  their  fellows  when  they  see  the 
beneficial  effect  of  continuous,  persistent  effort  in  the 
direction  for  good  ;  and  the  world  will  not  be  so  weary, 
when  men  see  that  to  all,  by  the  laws  of  God,  is  vouch- 
safed a  consummation  of  desire  even  in  this  world  ; 
that  reward  is  not  withheld  here  below,  if  the  proper 
means  be  taken  to  realize  the  same.  Oh,  for  the  time 
when  the  majority  will  not  have  to  stand  without,  and 
look  through  barred  gateways  at  the  light  and  warmth 
which  shines  for  others,  but  never  for  them  !     To  achieve 


2 1 6  MONE  V. 

this  result,  men  must    be   taught  so  as  to  comprehend 
clearly  tha*" 

Fortune  is  the  drudge  and  servitor 
Of  those  who  act,  and  ask  not  benison 
From  her  capricious  hand  ;  while  they  alone 
Are  her  dull  slaves  who  let  the  deed  go  by, 
And  think  on  bended  knees  to  win  her  smiles." 

There  is  no  surer  element  to  future  favor,  to  success, 
than  to  be  able  to  perceive  when  business  is  being  carried 
on  according  to  new  principles.  The  mass  lack  the 
courage  to  plunge  boldly  into  the  new  current  of  things, 
and  so  lose  the  chance  of  being  helped  by  the  tide  which 
would  carry  them  on  to  success  and  fortune,  and  by 
foolishly  fighting  against  it  they  lose  the  little  hold  on 
fortune  they  had  obtained.  Men  will  not  learn  from 
experience  that  "  the  infinitesimally  small  plays  in  the 
evolution  of  humanity  the  same  latent  and  incessant  part 
as  in  the  evolution  of  nature  "  (Ribot).  Nature  attains 
great  results  by  what  seems  insignificant  means.  Our 
bodily  and  mental  capacities  are  developed  and  enhanced 
by  practice  and  stern  necessity,  and  the  difficulties  aris- 
ing from  new  rivalries  are  necessary  to  rescue  us  from 
the  torpidity  and  stagnation  that  follow  from  our  being 
mere  creatures  of  routine  ;  the  growth  of  habit  making 
the  reflective  man  descend  to  the  instinctive  savage  or 
animal.  It  is  not  sufficiently  considered  to  what  a  re- 
markable degree  the  organic  and  mental  faculties  may 
be  developed,  and  also  how  largely  they  may  be  influ- 
enced both  in  degree  and  direction  by  the  circumstances 
and  conditions  of  our  surroundings  in  life.  "  As  the 
eagle,  by  soaring  in  free  air  and  among  rocky  heights, 
adapts  itself  to  soar,  so  the  mole  fits  itself  by  habit  for 


INDIVIDUAL    SUCCESS.  21/ 

the  loose  surface  earth  on  which  it  lives,  and  the  seal  for 
its  element,  the  sea  "  (Goethe).  Man  is  a  higher  order 
of  being,  and  it  has  not  been  sufficiently  impressed  upon 
him  how  necessary  it  is  to  ponder  the  exigencies  of  his 
time — to  go  about  the  daily  life  with  his  eyes  open,  ob- 
serving carefully  and  then  thinking  over  what  he  has 
observed.  Trained  judiciously,  he  has  power  within  him 
akin  to  the  marvellous,  an  intuition  of  judgment  we 
briefly  call  "  common-sense."  Started  in  the  world,  and 
told  to  read  all  he  sees  by  certain  premises  stamped  upon 
his  brains,  as  the  infallible  chart  for  him  to  guide  his  life 
by,  we  see  him  blundering  on,  unable  to  read  rightly  or 
see  correctly  ;  hence,  if  able  to  think,  his  reasoning  may 
be  right,  but  his  conclusions  wrong,  being  built  upon 
incorrect  data. 

The  middle  class  of  our  day  have  a  lesson  to  learn.  A 
new  power  is  in  their  midst.  They  must  look  their 
opponent  in  the  face,  recognize  his  strength,  and,  to 
arrive  at  a  correct  conclusion,  start  from  a  correct 
premise,  viz.:  that  the  real  point  is,  who  can  supply  at 
the  least  profit  ?  which  is  the  cheaper  process  of  distri- 
bution to  the  consumer  ?  By  this  test  the  question  will 
ultimately  have  to  be  settled,  and  from  this  point  I  ad- 
vise all  traders  to  view  the  question  as  it  affects  them- 
selves, as  opposed  to  the  stores.  It  is  useless  arguing 
that  the  skilled  trader  has  a  superior  professional  knowl- 
edge ;  that  he  has  a  costly  shop  to  keep,  skilled  assistants 
to  pay.  Time  is  certain  to  force  buyers  to  the  cheapest 
market ;  and  it  must  plainly  be  perceived  at  once  by  the 
trading  class  that  though  the  trader  who  asks  a  larger 
profit  than  his  neighbor  may  not  be  a  rogue,  he  is  un- 
doubtedly a  fool,  as  thereby  he  is  himself  destroying  his 


2 1 8  '  MONE  V. 

prestige,  cutting  away  the  base  upon  which  all  permanent 
commercial  structures  must  rest — is  killing  the  goose 
which  lays  the  eggs.  A  fatal  error  is  being  churlish  to 
occasional  buyers,  more  especially  if  you  know  that  the 
buyer  goes  to  the  stores.  It  may  be  unpalatable — so  is 
physic  ;  but  it  is  necessary  for  the  health  of  the  body  ; 
and  the  self-restraint  and  discipline  is  beneficial  that 
forces  us  to  be  equally  obliging  and  willing  to  serve  the 
casual  customer,  who  is  making  use  of  us,  as  the  regular 
supporter.  Attract  him  by  selling  articles  as  good,  at 
prices  as  reasonable,  with  prompt  and  civil  attention,  and 
a  disposition  to  study  and  oblige  ;  and  so  be  superior  to 
the  stores.  There  is  no  other  way  to  conquer  in  the 
struggle.  You  may  make  matters  worse  if  you  drive 
customers  away  by  churlishly  serving,  or  refusing  to 
accommodate,  those  who  merely  use  you  for  their  own 
convenience. 

The  next  point  is  to  frankly  state  that  the  prices  of  all 
articles  sold  shall  not  exceed  the  prices  at  the  stores  ;  but 
if  goods  are  sold  at  store  prices,  they  must  be  sold  upon 
the  store  condition — ready  money,  strictly  cash,  to  be 
paid  when  the  order  is  given.  jVo  booking  whatever  ;  no 
expecting  you  to  send  goods  home,  and  buyer  promising 
to  call  and  pay.  This  is  credit.  The  goods  having  to  be 
booked,  the  law  considers  it  a  debt,  and  liable  to  all  the 
expenses  and  risks  incidental  to  debtors.  If  a  mixed 
trade  of  credit  and  cash,  allow  lo  per  cent,  for  cash  with 
order,  or  on  delivery  ;  but  if  the  articles  be  not  paid  for 
when  left,  if  the  sale  ends  in  what  the  law  considers  an 
act  of  indebtedness,  reduce  the  discount  to  5  per  cent., 
send  in  all  accounts  quarterly,  and  close  every  account 
that  is  not  paid  within  one  month,  after  a  second  account 


INDIVIDUAL   SUCCESS.  2tg 

has  been  delivered.  Paying  5  per  cent,  interest  to 
tradesmen  if  they  wait  for  their  money  is  simply  absurd. 
A  debt  is  not  a  mortgage  or  a  loan  with  good  security  ; 
it  is  a  loan  at  great  risk,  with  all  the  worry,  risk,  and 
trouble  incidental  to  every  business.  There  are  many 
businesses  where  it  is  wiser  to  buy  of  a  tradesman  with 
an  established  reputation,  where  the  great  advantage  of 
the  skilled  tradesman's  professional  knowledge  is  of 
greater  consequence  than  price.  After  great  care  and 
trouble,  and  with  absolute  accuracy,  a  skilled  optician 
or  surgical-instrument  maker  is  able  to  supply  you  with 
the  very  thing  you  require  ;  and  to  obtain  these  articles, 
furnished  on  the  reputation  of  a  man  who  has  a  char- 
acter to  lose,  you  must  be  prepared  to  pay.  The  same 
argument  applies  to  nearly  every  thing.  You  may  get 
your  servants'  liveries  or  your  own  clothing  lower  in 
price,  but  if  they  lack  style  or  do  not  fit,  they  are  dearer 
in  reality  than  the  higher-priced  articles  ;  but  with  the 
necessaries  of  life,  and  numberless  simple  articles,  it  is 
as  well  only  to  consider  who  will  supply  you  at  the  lower 
price.  The  greatest  grievance  the  legitimate  trader  has 
against  the  public  is  their  unwillingness  to  pay  cash  when 
they  order  of  him,  although  they  do  so  without  the 
sliglitest  demur  at  the  various  stores. 

The  stores  have  proved  that  by  the  cash  system  goods 
can  be  sold  at  a  low  rate  of  profit,  and  that  the  rapid 
turn-over  really  gives  a  much  larger  net  profit  than  the 
ordinary  trader  obtains.  It  is  much  to  the  credit  of  the 
civil  servants  and  other  promoters  of  associations  that 
they  have  proved  that  a  cash  trade  can  be  done  ;  that 
such  a  trade  can  thrive  and  grow,  can  pay  fair  salaries  to 
its  servants,  build  or  rent  vast  premises,  pay  fair  interest 


220  MONEY. 

on  capital,  and  charge  the  public  an  average  moderate 
rate  of  profit  upon  all  articles.  The  legislature  has  no 
right  to  interfere,  except  to  remove  any  unfair  advantage 
one  trader  may  have  over  another.  Tradesmen  must 
rely  upon  themselves.  To  expect  help  from  the  legisla- 
ture is  simply  absurd.  What  they  have  to  do  is  to  alter 
their  system,  reduce  the  costs  and  risks  incidental  to 
their  mode  of  doing  business,  and  think  more  of  the 
consumers'  interest  by  having  fewer  "  middle-men,"  and 
bringing  producer  and  consumer  nearer  together.  As  to 
fearing  the  stores,  it  is  one  of  the  most  extraordinary 
delusions  that  ever  entered  the  mind  of  a  practical  body 
of  men.  Take  the  Army  and  Navy  Cooperative  Society's 
balance-sheet  for  the  half-year  ending  July  31,  1879. 
The  sales  for  the  six  months  were  j[^^()\,\d^2  ;  the  gross 
profits  from  sales  of  goods,  ^^67,658 — about  7^  per  cent.; 
working  expenses,  ^51,417,  or  with  interest  on  deben- 
tures, 5  per  cent,  dividend  on  capital,  and  ;^2,5oo  off 
buildings  ;  total  expenditure,  ;z{^5 6, 7 70,  leaving  a  residue 
of  ;jCi  2,26']  to  be  added  to  the  reserve  fund.  I  say  it  is 
a  disgrace  to  the  trading  class,  firstly,  that  such  a  result 
by  outsiders  should  be  possible  ;  secondly,  that  they  are 
content  to  ask  help  from  the  government,  like  a  weak 
child  leaning  on  its  parents,  instead  of  following  in  the 
footsteps  of  a  movement  capable  of  producing  such  ex- 
traordinary :-esults,  obtained  chiefly  by  a  "  rapid  turn- 
over," with  ready  money,  and,  after  giving  the  buyer  best 
value  for  his  money,  paying  all  expenses  and  interest, 
leaving  a  balance  such  as  few  merchant  princes  can 
show,  nearly  twenty-five  thousand  pounds  per  year,  clear 
gain,  added  to  reserve — mark  this — by  a  society  started  on 
the  cooperative  principle,  which  means  that  all  profits  be 


INDIVIDUAL   SUCCESS.  221 

divided  pro  rata  among  customers.     That  these  stores 
pay  well  there  cannot  be  any  longer  a  doubt,  and  my  ad- 
vice to  the  trading  class  is,  "  Go  thou  and  do  likewise"  ; 
if  you  allow  the  stores  to  undersell  you,  your  occupation 
will  soon   be  gone.     The    competition    for   custom — in 
other  words,  the  struggle  for  existence — is  so  keen,  that 
unless  you  can  fulfil  the  needs  of  your  customer,  supply 
him  as  others  can,  you  must  choose  another  calling.     To 
succeed    now,  the    excellence   of   your    goods   and   the 
lowness  of   your  prices   must    compare    favorably  with 
the    goods  and   prices    of   others.     Dismiss    from    your 
mind  the    idea   that  the    public    are    hard  ;    the  public 
have  a    right    to    go    where   they    can    best   be    served. 
You,  I    presume,  go    where    you    can    buy  to    the  best 
advantage,  and    we    all   take    advantage,    without  scru- 
ple,  of  our  particular  trade  knowledge  to    supply  our 
wants  from  those  who  serve  us  best,  and  pay  the  dis- 
tributer for  his  trouble  as  little  as  possible.     Who  pays 
retail  prices  if  he  can  supply  himself  at  wholesale  ?    The 
great  fallacy  is,  regarding  the  stores  as  if  they  had  been 
started  to  injure  distributers  ;  whereas  their  object  is  to 
benefit  consumers.     Every  man  who  sells  at  less  price 
than  his  fellow  in  any  trade  might  be  accused,  like  the 
stores,  of  injuring  the   distributer  ;   although,  so  far  as 
was  consistent  with  his  doing  so,  letting  all  others  live  as 
well.     There  can  be  no  doubt  that  the  sting  of  the  whole 
matter  lies  in  the  success  of  the  new  system,  and  it  is  to 
be  hoped   that  the  public   generally   will    exercise  for- 
bearance with  the  retail  traders  whilst  they  pass  through 
the  transition  stage,  and  give  them  time  to  realize  as  a 
fact  that  the  unquestionable  success  of  the  new  method 
of  transacting  the  distributing  business  of  the  country, 


222  MONE  V. 

unless  it  revolutionize,  must  eventually  ruin  their  own. 
Men  will  buy  in  the  cheapest  market ;  the  instinct  of 
self-interest  makes  every  man  who  has  money  to  spend 
prefer  buying  an  article  for  one  shilling  to  paying  eigh- 
teenpence  for  it.  This  principle  underlies  all  trade — 
that  is,  all  ready-money  trade.  The  real  struggle  is  be- 
tween system  and  system,  between  cash  and  credit,  be- 
tween thoughtful,  careful,  thrifty  buying  with  honest 
intent  to  pay,  and  reckless,  thoughtless,  improvident 
purchasing,  alike  devoid  of  principle  and  honesty.  Suc- 
cess to  the  modern  system,  which  is  but  a  recurrence  to 
earlier,  simpler,  fairer,  and  sounder  principles  of  trading, 
which  later,  more  complex,  and  more  perilous  practices 
of  trading  had  obscured.  The  credit  system  is  rotten  at 
the  core,  and  has  grown  to  such  an  extent,  in  its  risks, 
its  abuses,  its  recklessness,  and  its  injustice,  that  common 
sense  and  common  patience  at  length  revolted  from  its 
tyranny.  Can  it  be  wondered  at  that  the  public,  or  that 
part  of  it  that  means  paying  for  what  it  buys,  are  so 
willing  to  accept  a  better  and  fairer  system,  and  are 
ready  everywhere  to  cast  off  submission  to  the  old  pre- 
scription, and  revolt  against  the  injustice  inflicted  on 
them  by  a  system  which  made  the  honest,  ready-money 
customer  pay  for  the  bad  debts  of  the  dishonest  spend- 
thrifts ?  The  puzzle  to  my  mind  is,  that  so  many  traders 
still  refuse  to  open  their  eyes,  will  still  charge  the  ready- 
money  buyer  the  credit  prices,  still  refuse  to  give  dis- 
count to  the  ready-money  buyer,  although  they  give  it  to 
the  credit  customer  ;  then,  when  too  late,  they  cry  out 
because  the  ready-money  buyer  goes  elsewhere  directly 
the  chance  is  offered  in  the  form  of  a  cheaper  supplying 
medium  for  ready  money. 


INDIVIDUAL    SUCCESS.  223 

Common-sense  indicates  plainly  the  remedy  to  all 
traders  who  find  their  business  in  peril.  You  are  likely 
to  fail  because  of  the  success  of  a  new  rival.  How  is 
this  ?  Every  trader  tries  to  get  as  much  profit  as  he  can  ; 
all  have  the  same  object,  to  make  a  profit  for  themselves 
after  paying  all  expenses.  If  by  the  old  system  so  many 
are  perishing,  so  many  fail  to  see  their  way  any  longer  to 
success,  and  if  it  be,  as  I  have  indicated,  because  the 
times  are  against  the  system  of  those  who  fail  (and  this 
may  be  accepted  as  an  axiom  at  all  times),  and  if  this  is 
more  strikingly  apparent  because  of  the  introduction  of 
a  new  system,  which  is  a  great  success,  why  not  at  once 
adopt  it  ?  I  say  unhesitatingly  that  the  credit  system  is 
doomed  ;  it  cannot  stand  against  the  cash  system,  now 
the  public  see  what  they  had  to  pay  for  credit  ;  so  cease 
to  waste  time  objecting  to  the  causes  of  this  change,  and 
adapt  your  practice  to  the  altered  state  of  things,  and 
the  true  issue  of  the  conflict  will  be  the  reform,  not  the 
ruin,  of  the  "  retailers'  "  trade.  Be  men,  face  your 
destiny  ;  keep  your  customers,  still  accepting  the  proud 
position  of  being  one  of  the  **  middle  class"  of  England  ; 
rise  above  prejudice  ;  turn  your  shops  into  stores  ;  make 
cash  the  rule,  credit  the  exception,  instead  of  trying  to 
live  on  under  altered  conditions,  by  the  old  exploded 
system  of  making  credit  the  rule  and  cash  the  exception. 
The  public  do  not  care  whether  a  business  is  carried  on 
by  government  servants  or  not,  whether  it  be  managed 
by  an  individual  or  a  company.  Customers  want  in  iSSo 
to  be  assured,  as  a  very  condition  of  their  dealing,  that 
it  is  possible  for  the  tradesmen  they  employ  to  give  them 
the  best  goods  on  the  lowest  terms,  and  that  ready-money 
buyers  need  no  longer  be  mulcted  for  bribes,  bad  debts, 


224  MONEY. 

and  losses  consequent  on  giving  trust  or  keeping  accounts 
for  people  who  defer  their  payments.  The  credit  system 
will  linger  yet  for  a  long  time  ;  traders,  if  wise,  will 
shorten  this  period,  and,  while  snatching  their  own  inter- 
ests from  peril,  confer  a  vast  benefit  on  society  at  large. 
It  will  be  a  great  step  in  the  progress  of  humanity,  a  sys- 
tem of  trading  that  will  make  the  mass  of  customers  live 
"  before  the  world  "  instead  of  "  behind  the  world,"  and 
conduce  to  the  incalculable  increase  both  of  healthy 
trades  and  of  individual  peace  of  mind.  This  essay  is 
founded  partly  on  one  by  William  Lewery  Blackley, 
Rector  of  North  Waltham,  in  the  Contemporary  Review 
for  February,  1879, — the  most  sensible  article  I  have  read 
on  the  subject, — and  I  shall  be  well  repaid  if  it  makes  any 
trader  reflect,  and,  seeing  that  the  fault  is  in  the  old  sys- 
tem, at  once  resolve  to  exchange  it  for  the  new,  a  good 
instead  of  a  bad  system,  which  will  not  only  save  traders, 
but  regain  trade.  If  they  will  cling  to  the  wrong  system, 
ruin  is  inevitable,  and  they  will  have  no  right  to  com- 
plain, since,  with  the  issue  put  clearly  before  them,  they 
have  preferred  to  immolate  their  interests  on  the  altar  of 
their  prejudices.  Before  deciding,  remember  I  am  sug- 
gesting no  new  theory,  but  only  asking  you  to  do  what 
has  been  done  already,  for  those  who  have  adopted  the 
new  system  have  been  so  successful,  that  their  efforts 
should  encourage  and  cheer  on  all  to  attempt  the  same 
reformation.  In  1862  I  began  the  cash  system  long  be- 
fore stores  were  thought  of,  and  have  gradually  devel- 
oped the  shop  into  the  store.  The  freedom  from  the 
anxiety  of  book  debts  is  as  being  transferred  from  hell  to 
heaven,  whilst  the  uncertainty  of  trade  is  removed  by  the 
sale  of  numerous  articles  ;  as  when  one  department  is 


INDIVIDUAL    SUCCESS.  22 5 

slack,  the  others  are  brisk,  and  the  sales  in  one  depart- 
ment lead  to  sales  in  others.  The  men  who  have  no 
trade  are  no  more  justified  in  saying,  "  Success  is  im- 
possible," than  a  person  who  never  entered  the  water  has 
to  assure  Captain  Webb  that  no  human  being  can  swim. 

Progress  cannot  be  impeded.  Should  the  electric  light 
prove  a  success,  no  consideration  for  the  losses  of  gas 
companies  will  prevent  its  adoption.  The  success  of  the 
stores  will  hurt,  nay,  exterminate  those  traders  who 
refuse  to  go  with  the  times  ;  but  the  progress  of  the 
stores  can  no  more  be  stopped  to  protect  the  trading 
class,  than  the  railways  be  put  aside  to  allow  the  old 
stage-coachs  to  be  restored.  Owing  to  the  strikes  and 
other  causes,  prices  got  higher  ;  people  with  fixed  in- 
comes saw  no  other  remedy  than  to  reduce  the  cost  of 
the  necessaries  of  life.  The  majority  being  unable  to 
increase  their  means,  it  was  inevitable  that  they  should 
all  co-operate,  or  buy  of  those  who  did,  so  as  to  pur- 
chase what  they  required  at  moderate  prices.  The  cash 
system  will  do  away  with  many  middlemen,  who  have 
only  been  necessary  because  they  gave  credit  to  a  class 
the  manufacturer  would  not  credit,  or  gave  the  time  by 
the  old  system  of  credit  the  retailers  wanted.  A  reduc- 
tion in  prices  of  the  necessaries  of  life  will  tend  to  reduce 
the  price  of  labor,  and  lead  to  returning  trade  and  a 
revival  of  prosperity. 

Unfortunately,  as  Max  Miiller  observes,  "universal 
custom  is  more  powerful  than  books,  however  sacred  ; 
for  books  are  read,  but  customs  are  followed."  Still,  I 
do  most  earnestly  ask  the  trading  class  to  meet  the  wants 
of  the  times  ;  reduce  prices  with  cash  payments  ;  strive 
in  every  way   to  regain  the    confidence   of   the  public. 


226  MONEY. 

Reduced  prices  mean  a  greater  consumption,  and  the 
consequently  increased  demand  benefits  the  workers  of 
all  classes.  The  change  means  really  that  the  middle 
class,  the  distributing  class,  must  do  more,  and  do  that 
more  thoughtfully  and  skilfully,  than  heretofore.  Indi- 
viduals, as  nations,  dare  not  be  deaf  to  the  warning  of 
Goethe  :  "  Thou  must  rise  or  fall,  must  conquer  and 
subjugate  or  serve  and  surrender  ;  must  suffer  or  tri- 
umph, must  be  anvil  or  hammer."  "  No  finality  "  must 
be  our  motto  ;  the  world  will  progress  whether  we  wish 
it  or  not.  In  days  gone  by  the  defence  of  the  realm  was 
left  to  the  public  spirit  of  monarchs,  nobles,  and  large 
proprietors  ;  now  it  is  dependent  on  a  government  sup- 
ported by  public  confidence.  The  maintenance  and 
increase  of  our  national  prosperity  have  depended  solely 
on  the  stimulus  of  private  enterprise.  The  law,  whether 
wisely  or  not,  has  interfered  much,  and  imposed  regula- 
tions and  restrictions  upon  the  mill-owner,  ship-owner, 
and  employer  of  labor.  This  has  given  our  foreign  com- 
petitors a  great  advantage  over  us  ;  and  to  overcome  the 
new  difficulty,  a  new  power  is  springing  up,  private  enter- 
prise is  receiving  a  great  check.  Where  the  individual 
developed  a  trade  in  a  single  article  or  articles  of  a  single 
kind,  public  companies  worked  by  managers  and  serv- 
ants seem  destined  to  take  the  place  of  the  men  who 
worked  hard  for  their  private  gain.  The  expenses  and 
risks  of  business  have  been  steadily  increasing,  and  the 
only  plan  to  make  a  trade  pay  is  to  sell  a  multitude  of 
articles.  The  times  require  broader  views.  We  have 
grown  beyond  the  shopkeeper  who  thinks  it  right  to 
have  his  contra  account  with  every  shopkeeper  he  deals 
with,  who  tells  you  he  believes  in  living  and  letting  live, 


INDIVIDUAL    SUCCESS.  22/ 

etc.  Men  of  greater  enterprise  are  needed.  To  suc- 
ceed, you  must  understand  business,  money,  bills  of 
exchange,  and  their  power  if  properly  used.  The  method 
of  trade  will  be  that,  whether  we  like  it  or  not,  which 
affords  facilities  for  the  raising  of  the  greatest  amount 
by  all,  and  gives  to  each  as  large  a  proportion  to  satisfy 
the  wants  of  each  as  the  exigencies  of  production  will 
allow.  As  our  forefathers  passed  from  feudalism  to  the 
modern  era,  so  are  we  unconsciously  passing  from  this 
to  another, — passing  from  the  era  based  upon  the  idea 
that  individual  enterprise  is  the  best  for  the  national 
wealth,  and  that  competition  will  determine  the  share  of 
each  individual.  That  idea  has  been  wonderfully  suc- 
cessful. The  most  suitable  centres  were  sought  out  for 
different  manufactures,  and  the  population  drawn  to  that 
quarter  where  their  labor  would  be  most  productive. 
The  same  force  broke  down  the  restrictions  which  had 
fettered  trade,  and  compelled  men  to  adopt  more  rapid 
methods  of  doing  their  work.  The  era  of  private  enter- 
prise has  increased  production,  by  developing  the  re- 
sources of  each  locality,  and  by  introducing  new  methods 
of  manufacture  ;  and  there  are  many  directions  in  which 
it  has  still  a  great  part  to  play.  But  it  is  as  well  for  men 
to  see  that  private  enterprise  is  not  the  force  of  the 
future ;  nor  does  it  give  us  the  best  means  of  carrying  on 
our  industry  at  the  point  which  it  has  already  reached. 
The  advantages  of  the  last  fifty  years  have  been  too 
much  regarded  from  the  standpoint  of  the  individual 
who  competes,  than  the  body  politic  as  a  whole.  Doubt- 
less, in  many  cases  the  nation  was  the  gainer  by  the 
energy  of  those  who  pushed  -their  businesses  so  as  to 
make  fortunes  for  their  families  ;  but  we  have  too  many 


228  MONEY. 

sleeping  partners,  and  the  loss  to  society  from  their  inac- 
tion and  idleness  must  be  thought  of,  as  well  as  the  gain 
from  the  enterprise  of  the  founder  ;  the  permanent 
charge  on  the  nation  which  is  involved  in  supporting 
their  posterity,  is  such  a  terribly  heavy  price  to  pay  for 
the  services  of  the  great  commanders,  or  the  exceptional 
enterprise  of  forgotten  capitalists.  Nor  is  such  a  system 
the  best  for  making  as  much  as  we  might  or  should  of 
the  national  resources.  The  basis  of  the  future  will  be 
"  organization  "  ;  individuals  will  associate  together 
more,  and  through  the  agency  of  these  organizations 
more  will  be  attempted  and  accomplished  for  the  com- 
mon good  than  could  be  effected  by  isolated  efforts. 
The  post  office  is  under  the  government  ;  the  telegraph 
companies  have  been  taken  over  by  the  state.  The 
railways  will  be  in  the  hands  of  the  government  ;  the 
education  department  will  gradually  eliminate  all  pri- 
vate schools.  There  must  be  "  national  notes  "  issued 
by  the  government.  All  monopolies  must  be  abolished. 
All  positions  must  be  open  to  the  men  who  have  the 
energy  and  capacity  to  fill  them.  Government  offices  must 
cease  to  be  a  sitiecure  ;  the  nation  must  learn  the  lesson  taught 
by  its  servants.  We  must  have  "  value  for  our  money."  It 
is  only  by  the  people  acting  together  that  they  can  sup- 
ply each  other  with  the  light,  water,  public  parks,  gym- 
nasiums, baths,  wash-houses,  etc.,  that  our  crowded 
populations  require.  Birmingham,  Manchester,  Edin- 
burgh, have  taken  the  lead,  and  we  see  in  many  direc- 
tions how  private  enterprise  and  competition  are  giving 
way  to  organization. 

But  it  is  when  we  come  to  the  distributing  class,  the 
retail  shopkeeper,  that  we  see  that  private  enterprise  is 


nVDIVlDUAL    SUCCESS.  229 

doomed.  The  loss  by  the  present  method  of  distribution 
is  enormous.  Trades  vie  with  trades  in  their  efforts  to 
catch  the  jjublic  taste;  and  in  those  trades  "affected  by 
fashion,  where  the  demand  is  so  capricious,  there  is 
plenty  of  scope  for  the  individual  judgment  and  private 
enterprise ;  but  in  catering  for  the  wants  of  the  masses, 
for  all  the  necessaries  of  life,  for  all  articles  that  only 
need  economical  distribution  by  thoughtful  organization, 
associations  must  supersede  the  individual,  for  they  do 
their  trade  on  a  true  principle — ready  money, — and  avoid 
that  frightful  waste  of  our  time,  advertising  on  the  one 
hand  or  travelling  on  the  other,  with  credit,  "  dating  on," 
book  debts,  and  bad  debts.  The  extension  of  the  new 
system  has  been  most  rapid.  The  growth  of  association 
among  traders  and  of  co-operative  "  distributive  "  socie- 
ties alike  points  towards  the  limitation  of  private  enter- 
prise in  retail  trade,  and  indicates  the  development  of 
organization  in  opposition  to  competition.  The  proba- 
ble advantages  are  that  the  price  to  the  consumer  will, 
as  organization  advances,  bear  an  increasingly  closer 
relation  to  the  cost  of  production  ;  the  more  accurate 
calculation,  which  would  be  possible,  of  the  probable 
demand  would  render  production  much  less  variable  and 
uncertain  ;  the  lessened  dependence  on  the  services  of 
middlemen  would  render  distribution  less  expensive ; 
and  travelling  for  orders  and  advertising  would  cease. 

Do  not  imagine  that  the  two  systems  will  work  to- 
gether ;  whichever  serves  the  public  best  will  be  the 
victor.  As  the  old  feudal  and  guild  organizations  dis- 
appeared before  the  era  of  competition,  so,  if  it  be  a 
better  means  of  supplying  the  public  wants,  will  the  new 
oganization  spring  up,  and  the  dominance  of  competition 


230  MONEY. 

wane  in  its  turn.  For  the  individual  these  transitions 
are  serious,  ruinous  ;  for  the  public  generally,  of  benefit, 
as  a  necessity  of  future  life,  a  sign  of  continued  growth. 
We  want  a  new  basis  for  commercial  success,  and  if 
organization  and  associations  are  more  economical  for 
home  industry,  they  will  be  equally  so  for  the  foreign 
trade.  We  have  needed  for  some  time  past  better  organ- 
ization to  compete  with  our  neighbors.  The  future  is 
for  that  nation  that  is  willing  to  be  taught  how  best  to 
study  the  wants  of  each,  and  most  economically  satisfy 
the  same,  and,  without  limiting  the  liberty  or  crushing 
the  individuality  of  the  individual,  so  arranging  for  a 
greater  and  better  division  of  the  nation's  wealth. 

NATIONAL  PROSPERITY. 

The  discovery  that  labor  is  the  source  of  all  wealth 
has  been  attributed  to  Adam  Smith,  but  in  the  "  Life  of 
Paterson  "  we  have  the  following  extract  from  a  tract 
first  published  in  the  year  1690  (Adam  Smith  was  born 
in  1723),  and  republished  in  the  "  Harleian  Miscellany  " 
half  a  century  later.  The  work  appeared  in  the  name 
of  Sir  Dalby  Thomas,  and  it  was,  doubtless,  substantially 
the  production  of  that  experienced  merchant  ;  but  the 
author  thinks  Paterson  contributed  largely  to  its  pages, 
for  it  is  his  style  of  thought.  After  an  elaborate  survey 
of  the  sources  of  all  national  wealth,  the  writer  concludes 
that  the  "  true,  original,  and  everlasting  source  of  wealth 
is  nothing  else  but  labor  ;  and  that  if  all  the  laborious 
people  of  the  kingdom  left  working,  to  live  upon  the 
national  produce  of  it,  distributed  among  them  in  an 
equal  proportion  by  way  of  charity,  as  parish  poor  and 


NATIONAL  PROSPERITY.  23 1 

beggars  are  supported,  it  would  not  be  long  before  the 
nation  became  necessitous,  naked,  and  starving,  and, 
consequently,  land  and  houses  worth  nothing." 

A  little  reflection  will  make  us  sensible  that  a  very  few 
years  of  idleness  must  complete  the  matter  ;  whence  we 
can  no  longer  doubt  but  that  labor  and  industry,  rightly 
applied,  are  the  sole  causes  of  the  wealth  of  a  nation  ; 
that  money  is  only  the  scales  or  touchstone  to  weigh  or 
value  things  by  ;  and  that  land  only  will  yield  no  rent, 
but  as  labor,  employed  for  the  support  of  luxuries  as  well 
as  necessaries,  finds  due  encouragement  and  increase. 
Industry,  enterprise,  and  thrift  are  the  three  great  factors 
in  making  a  nation  wealthy.  Nations,  like  individuals, 
may  find  wealth  a  curse  instead  of  a  blessing,  if  not 
earned  in  the  legitimate  way,  as  instanced  after  the 
Franco-German  war.  The  load  France  had  to  carry 
roused  all  her  energy  and  thrift  ;  ignominiously  beaten 
on  the  one  hand,  she  came  out  of  the  industrial  and 
financial  ordeal  most  gloriously  ;  and  the  wealth  has 
found  itself  wings,  and  only  seems  to  have  impoverished 
the  victor.  It  is  simple  enough.  You  have  money  ;  you 
pay  no  attention  to  production  ;  the  money  slowly,  but 
surely,  passes  from  your  hands  to  another's  ;  the  money 
remains,  but  you,  in  living  upon  it,  are  failing  to  pro- 
duce, and  soon  will  cease  to  have  money  or  money's 
worth.  Your  opponent  has  been  deprived  of  his  money, 
but  he  diligently,  assiduously  goes  on  accumulating 
money  s  7Vorth — things  that  will  exchange  for  and  bring 
him  back  the  money  taken  from  him.  So  nations  and 
individuals  get  wealth,  producing  by  their  labor  and 
skill  money's  worth,  and  taking  care  of  the  money  they 
get  in  exchange  ;  by   never  losing  sight  of  the  fact  that 


232  MONEY. 

plenty,  splendor,  and  grandeur  in  the  nation  can  have 
no  other  fountain  but  wisdom,  industry,  and  good  con- 
duct ;  that  the  ornaments  and  delights  of  life  are  the 
true  issues  of  virtue,  valor,  and  the  elevation  of  the 
mind,  as  well  as  the  just  reward  of  industry,  plenty,  and 
contentment  ;  and  that  progress  of  every  kind  must  de- 
pend upon  wisdom,  industry,  thrift,  good  conduct,  as 
poverty,  disgrace,  contempt  of  us  by  our  fellows,  gener- 
ally spring  from  folly,  idleness,  and  vice. 

How  pleasant  it  is  when  trade  is  good,  all  forms  of 
production  in  profitable  activity,  and  orders  flowing  in 
upon  manufacturers,  causing  the  "sanguine"  to  be 
tempted  to  add  to  their  capacities  of  production  !  Labor 
being  fully  employed,  the  wages  fund  soon  begins  to  ap- 
pear in  the  excise  returns  ;  giving  satisfaction  to  the 
Chancellor  of  the  Exchequer,  but  the  reverse  to  all  people 
with  "  fixed  "  incomes  ;  as  good  times  to  producers  mean 
enhanced  prices  for  all  commodities,  a  reduction  in  the 
purchasing  power,  and  a  limiting  of  the  enjoyments  of 
this  life  to  all  with  a  stationary  income.  The  result, 
however,  is  the  benefit  of  the  masses.  It  is  a  clear  gain 
to  the  nation,  as  a  whole,  when  all  its  members  are  fully 
employed  ;  though  it  necessarily  puts  to  a  disadvantage 
those  whose  incomes  are  inelastic.  Bad  trade  means 
just  the  reverse.  Orders  are  scarce  ;  production  dimin- 
ishes ;  employment  is  limited  ;  the  revenue  is  a  source 
of  anxiety  ;  a  blight  affects  every  industry  ;  prices  fall  ; 
the  "  fixed  "  income  class  get  more  for  their  money  ;  the 
few  benefit,  but  the  mass  suffer,  during  periods  of  de- 
pression. 

"  Panics  "  are  always  depressing,  but  in  its  length  this 
last  has  been  without  precedent.     For  five  years,  nearly 


NATIONAL  PROSPERITY.  233 

six  years,  we  have  had  to  suffer,  without  a  gleam  of  sun- 
shine to  relieve  the  monotony  of  gloom  ;  and  we  feel  it 
all  the  more,  because  the  few  years  before  we  went 
through  a  time  of  inconvenient  activity,  that  caused  a 
recklessness,  a  general  waste,  a  want  of  thrift,  that  con- 
verted a  period  of  extraordinary  prosperity  and  growth 
into  one  of  decline  and  seeming  decay. 

How  was  this  ?  How  is  it  that  the  commercial  edifice 
seems  to  topple  over  so  suddenly  ?  Surely  there  is  a 
means  of  ascertaining  or  estimating  the  causes  of  these 
sudden  variations.  The  last  panic  began  with  the  failure 
of  Overend,  Gurney,  c*v:  Co.,  in  1866  ;  the  present  one 
commenced  with  the  failure  of  Jay  Cooke,  in  the  autumn 
of  1873,  i'^  America  ;  and  the  redemption  money  of 
France  became  exhausted  about  the  same  time  in  Ger- 
many. Now  if  the  feverish  activity  in  Germany  and  the 
United  States  caused  the  unnatural  demand,  the  too  ex- 
uberant development  of  our  industry,  the  previous  "good 
times," — if  that  extraordinary  prosperity  was  caused  by 
"  exceptional  "  circumstances  that  we  ought  to  have  fore- 
seen could  not  last,  surely  we  might  have  prepared  for 
the  collapse  that  was  inevitable.  The  prosperity  came 
from  without  ;  with  the  cessation  of  the  cause  the  effect 
ceased,  so  that  flaccidity  followed  an  energetic  growth. 
We  must  look  our  privations  in  the  face.  The  home 
population  must  be  engaged  more  profitably.  They  must 
produce  more,  so  as  to  be  able  to  consume  more  ;  they 
must  increase  their  supply  of  produce,  so  as  to  get  the 
"  money  "  in  exchange  that  will  give  them  the  right  to 
"demand  "  more  for  consumption.  .<4// must  be  taught 
this  rigid,  inexorable  law.  Production  must  precede 
consumption.     They  must,  one  and  all,  do  a  something. 


234  MONEY. 

produce  a  something,  that  entitles  them  to  "money  "  in 
exchange  with  which  to  buy  what  they  want.  Our  prog- 
ress depends  upon  the  development  of  our  manufactures  ; 
but  to  go  on  multiplying  the  quantity  of  our  woven 
stuffs  of  cotton  and  of  wool  will  be  madness,  unless  we 
see  the  absolute  necessity  of  producing  every  article  at 
the  minimum  of  cost,  by  taking  advantage  of  every  help 
the  experience  of  the  past  has  gained  for  us  ;  above  all, 
recosnizins  the  fact  that  our  existence  as  a  nation  de- 
pends  on  our  being  able  to  supply  the  wants  of  others, — 
a  position  that  can  only  be  held  by  cheapness  of  pro- 
duction. By  cheapness  is  not  intended  "  low-priced  " 
articles,  but  the  thorough  understanding  by  masters  and 
men  of  their  work  ;  all  earnest,  thoughtful,  and  attentive 
to  all  details  ;  the  zealous  cooperation  of  all  concerned 
in  any  and  every  branch  of  manufactures,  so  as  to  secure 
the  maximum  of  product  at  the  minimum  of  cost.  An- 
other important  point  is,  to  divide  our  powers, — some 
directing  their  efforts  to  works  of  utility,  others  to  works 
of  art,  to  satisfy  the  highest  tastes  ;  although  I  fail  to  see 
why,  in  the  commonest  products,  beauty  of  form,  beauty 
of  properties,  and  the  nearest  approach  to  beauty  and 
harmony  of  color  that  the  price  will  admit  of,  should  not 
be  considered. 

"  Panics  "  only  represent  an  intensity  of  the  struggle 
ever  going  on.  "  The  survival  of  the  fittest  "  is  the  in- 
exorable law  of  nature.  We  should  educate  our  people, 
more  especially  the  working  class,  to  strive  after 
producing  the  most  beautiful,  the  most  perfect  work 
within  their  power.  The  time  has  come  when  it  is 
imperative  that  we  know  our  strength,  and  wisely  hus- 
band all  the  means  at  our  disposal,  and  enlarge  those 


NATIONAL   PROSPERITY.  235 

means  to  the  very  utmost,  for  the  struggle  for  life, 
for  the  life  of  the  nation,  —  a  struggle  that  is 
certain  to  beset  our  future  path.  There  can  be  no 
"excellence  "  in  any  thing  unless  our  heart  and  soul  are 
in  the  work.  The  material,  however  common  it  may  be, 
win  be  better,  and  worth  more  money  in  the  market — at 
the  very  least,  will  be  sure  of  a  quicker  and  more  regu- 
lar sale — if  well  made,  than  if  carelessly  made.  Excel- 
lence, combined  with  cheapness,  must  be  our  study  ;  we 
shall  then  be  able  to  defy  the  world  ;  whereas  if  we 
continue  careless,  only  thinking  of  making  things  that, 
looking  cheap,  sell  well  at  first,  but  not  being  really  cheap, 
do  not  bring  us  regular  orders,  our  day  has  gone — others 
more  worthy  will  have  to  fill  our  place.  We  want 
"  true  work  " — all  articles  to  be  what  they  profess  to  be  ; 
we  want  the  people  trained  to  see  the  mistaken  policy, 
for  any  continuous  trade,  of  "shams"  ;  we  want  them 
to  see  the  value  of  a  reputation  without  blemish  ;  we 
want  them  to  see  that  "  impostures  "  react  upon  those 
who  trade  trickily.  No  one  has  confidence  in  such 
men,  will  not  trust  them,  and  refuse  to  give  orders  to  or 
buy  from  them.  We  want  the  "  morality  "  of  the  nation 
to  be  so  raised,  that  all  such  plausible,  scheming  trick- 
sters will  be  treated  with  the  contempt  such  degraded 
natures  deserve  ;  we  want  the  people  "  honest "  enough 
to  express  its  disgust  at  every  kind  of  chicanery,  to  have 
the  moral  courage  to  speak  out,  and  call  a  cheat  a  cheat. 
The  nation  cannot  exist,  cannot  hold  its  place  in  the 
world,  by  the  efforts  of  the  few  ;  it  needs  the  concen- 
trated enterprise  of  the  many,  the  desire  for  improve- 
ment to  be  stirred,  and  to  manifest  itself  in  the  daily 
works  of  all.     And  we  shall  see  an  improvement  in  the 


236  MONEY. 

product  when  the  brain  and  hand  work  together.  The 
task  of  the  future  may  be  more  arduous,  but  it  need  not 
be  any  the  less  successful  than  in  the  past.  Nor  is  it 
more  than  men's  energies  are  equal  to  ;  it  simply  needs 
more  earnestness,  greater  thoroughness  ;  being  a  benefit, 
in  fact,  to  every  one,  for,  increasing  his  mental,  it  will 
double  the  value  of  his  physical  labor.  "  Improvement 
in  the  work  "  will  add  to  the  market  value  of  the  work, 
and  thereby  to  his  own  comforts  and  the  enjoyments  of 
his  family.  This  is  the  way  to  make  progress,  to  ensure 
success  individually  and  nationally.  It  is  useless  to  ex- 
pect miracles  ;  we  must  adopt  the  right  means,  and  be 
resolved  to  conquer  all  obstacles,  to  surmount  all  diffi- 
culties, to  achieve  the  end  in  view.  And  if  that  end 
be  to  ensure  regularity  of  trade,  we  must  make  only 
durable,  trustworthy  goods — goods  that  experience  will 
prove  to  be  the  cheapest,  as,  wearing  better  and  lasting 
longer,  they  are  really  the  cheapest,  the  best  value  to  be 
had  for  the  money.  But ."  cheapness  of  production" 
must  be  considered.  For  instance,  we  are  much  inter- 
ested in  the  iron  trade,  which  in  August,  1879,  is  reviv- 
ing, because  our  prices  are  lower  now  than  in  America. 
But  the  manufacturers  say,  prices  leave  no  margin  of 
profit  ;  and  it  is  said  that  there  are  some  descriptions  of 
iron  and  steel  manufactures  in  which  England  cannot 
compete  with  the  United  States.  Now,  the  reason  is  so 
simple,  it  seems  nearly  incredible  that  this  point  in  favor 
of  the  American  method  should  have  existed  for  a  day 
after  we  had  found  it  out.  It  is  similar  to  the  superior 
method  of  the  Swiss  in  making  their  watches,  over  the 
English  method,  which  Sir  John  Bennett  worked  so  hard 
to  remove  by  his  lectures,  etc.     American  workshops,  it 


NATIONAL    PROSPEKITY.  237 

is  said,  can  turn  out  locomotives  at  25  per  cent,  below 
English  prices,  by  adhering  to  certain  fixed  designs,  thus 
avoiding  multiplicity  of  patterns.  "  Why  not  have  all 
locomotives,  all  railway  rolling-stock,  one  pattern,  if  it 
be  so  much  cheaper  ?  "  The  style  of  carriages  is  quite 
immaterial  ;  for  on  the  American  railways  there  are  only 
three  or  four  distinct  types  of  locomotives,  and  in  each 
of  these  types  there  is  but  little  variation  from  the  fixed 
standard.  By  this  means  the  leading  shops  in  Philadel- 
phia and  in  Rhode  Island  send  out  annually  hundreds  of 
engines,  of  which  all  the  parts  are  perfect  and  interchange- 
able, the  exact  duplicates  of  each  other.  You  may  say, 
this  is  against  your  theory  of  excellence  and  beauty  ;  and 
that  it  keeps  man  to  the  level  of  an  automaton,  dis- 
couraging originality,  etc.  But  I  must  remind  you,  two 
ideals  were  submitted — works  of  art  and  works  of  utility  ; 
but  in  the  latter  striving  after  all  the  excellence  and 
beauty  possible  at  d.  given  price.  Men  must  think  more. 
If  they  find  themselves  beaten,  because  of  a  inore  eco- 
nomical method,  it  is  wiser  to  beat  their  rival  with 
his  own  weapon.  The  American  plan  is  much  more 
economical  than  the  Englisli  method  of  building  its 
locomotives  on  innumerably  different  models,  and 
seemingly  for  no  other  reason  than  to  bring  out  inno- 
vations of  design  upon  the  smallest  possible  pretext. 
Another  error  in  the  iron  trade  was  being  overcome  by 
the  advent  of  Sir  H.  Bessemer's  great  invention,  steel 
rails.  The  opposition  ought  to  have  stimulated  the 
Welsh  iron-makers  to  improve  the  quality  of  their  goods 
in  every  possible  way  ;  instead  of  which,  they  produced 
an  inferior  kind  of  iron,  botli  bar  and  rails,  wliich  neces- 
sarily and  deservedly  suffered  in  competition  with  Besse- 


238  MONEY. 

mer  steel.  As  "  Iron  "  suggested  in  the  Times  of  August 
19,  1879,  "  a  large  and  profitable  trade  is  still  open  for  a 
superior  quality  of  bar  iron  ;  and  one  is  hardly  permitted 
to  doubt  that  if  half  the  science  which  had  been  so 
successfully  applied  to  the  manufacture  of  steel  had 
been  devoted  to  the  manufacture  of  bar  iron,  the  posi- 
tion of  this  latter  important  industry  in  South  Wales 
would  have  been  widely  different  to  what  it  has  been 
during  the  past  five  or  six  years."  Times  of  stagnation 
are  the  opportunities  offered  by  nature  for  wise  men  to 
reform  their  ways.  The  morn  seems  breaking  ;  may  we 
have  learnt  from  the  dark  night  from  which  we  are  emer- 
ging, how  to  keep  the  light  of  day,  the  sunshine  of  pros- 
perity, round  about  us  !  If  this  be  so,  the  ordeal  will  not 
have  been  borne  in  vain  ;  for  if  the  right  means  be 
adopted,  there  is  no  reason  whatever  why  activity  and 
prosperity  should  not  again  exist  in  all  our  workshops 
and  places  of  business.  Adam  Smith  says,  in  the  "  Wealth 
of  Nations,"  book  iv.,  chap,  ii.,  p.  750  :  "If  the  exchange- 
able value  of  the  annual  produce  exceeds  that  of  the 
annual  consumption,  the  capital  of  the  society  must  annu- 
ally increase  in  proportion  to  the  excess.  The  society  in 
this  case  lives  within  its  revenue,  and  what  is  annually 
saved  out  of  its  revenue  is  naturally  added  to  its  capital, 
and  employed  so  as  to  increase  still  further  the  annual 
produce.  If  the  exchangeable  value  of  the  annual  prod- 
uce, on  the  contrary,  falls  short  of  the  annual  consump- 
tion, the  capital  of  the  society  must  annually  decay  in 
proportion  to  this  deficiency.  The  expenses  of  the  so- 
ciety in  this  case  exceed  its  revenue,  and  necessarily 
encroach  upon  its  capital  ;  its  capital,  therefore,  must 
necessarily  decay,  and  together  with  it  the  exchangeable 


NATIONAL    PROSPERITY.  239 

value  of  the  annual  products  of  its  industry."    A  society 
is  but  an  agglomeration  of  individuals  ;  let  us  consider  it 
as  one  huge  family,  and  realize  the  argument  of  Adam 
Smith  as  applying  personally  to  ourselves  individually. 
There  is  no  getting  over  the  fact  that  a  nation  can  only 
prosper,  can  only  exist,  by  the  individuals  of  which  it  is 
composed  producing  more  than  they  consume,  and  wisely 
employing  their  capital  upon  works  of  utility  and  healthy 
recuperation.  Professor  Cairns,  in  his  work  on  the  slav-e- 
power,  written  while  the  Confederacy  was  still  erect  and 
vigorous,  demonstrated   the   economical  mischief  of  the 
system  ;  and  it  is  much  to  the  credit  of  Mr.  Davis  that 
in  1879  he  had  the  moral  courage  to  admit  that  the  abo- 
lition of  slavery  had  been  economically  advantageous  to 
the  South,  although  he  was  foremost  with  the  Southern- 
ers in  vehemently  denouncing  it  as  involving  their  ruin. 
The  sufferings  of  the  planters  through  the   civil  war  are 
wellnigh  forgotten  ;  but  the  South,  under  the  system  of 
free  labor,  paid  for  at  market  rates,  according  to  nature's 
law  of  supply  and  demand,  can  grow  cotton  and  sugar  to 
greater  advantage  than  under  the  slave  system,  and  can 
open  up  new  industries,  which   would   never  have  been 
thought  of — in  fact,  would  never  have  been  attempted — 
with  slave  labor  ;  so  the  great  blot  bore  its  own  punish- 
ment, as  all  infringements  of  God's  laws  do.     Men  have 
a  right  to  be  free  of  their  fellow-men,  and  also  a  right  to 
take  their  labor  where  it  is  most  appreciated,  and  will  be 
the  best  paid  for.     On  the  other  hand,  the  employers  of 
labor  have  an  equal   right  to  obtain  labor  at  its  market 
price,  regulated  by  supply  and  demand,  and  free   of  all 
state  control  or  interference  ;  to  open  as  early  as  they 
like,  and  close  when  they  like  ;  subject  to  visits  by  in- 


240  MONE  V. 

spectors  to  see  that  there  are  proper  means  of  ventila- 
tion and  sanitation,  and  that  the  machinery  is  watched 
for  the  prevention  of  accidents  ;  but  free  from  those  mis- 
taken motives  of  philanthropy  which  attempt  to  fix  the 
hours  of  labor,  which  should  be  left  to  the  common-sense 
of  the  employer  and  employed  to  regulate  for  themselves. 
The  anomaly  of  the  nation's  industry  paralyzed  for  want 
of  orders — as  the  retailers  think,  because  of  the  want  of 
money,  although  at  the  same  time  money  is  in  such  abun- 
dance that  it  can  be  borrowed  at  i  per  cent,  or  i^  per 
cent. — is  really  explainable  by  a  want  of  production,  by 
a  want  of  a  scarcity  of  goods  asking  for  the  money  in 
exchange.     People  fail  to  see  that  the  money  is  but  a 
medium,   and  will  be  forthcoming,   and   is    only  to  be 
had   when    the    articles  are  made  and  ready  to  be  ex- 
changed for  the  money.     The  money  is  useless  without 
the    commodity.       To    get   the   money,  then,  make  the 
commodity,  for  and  by  which  the  money  can  be  had 
in  exchange.      Our  present  depression  began  with  the 
American  crisis  in  1873,  and  has  affected  for  six  years, 
more    or    less,    nearly    every    nation    distinguished    by 
civilization,   by    industrial    energy,   and    by   commercial 
ability.     Is  the  problem  really  insoluble  ?     How  comes 
it  to  pass  that,  amidst  resources  so  many  and  so  mighty, 
with  laborers  and  machinery  capable  of  production  to 
any  extent,  yet  destitution  and  misery  side  by  side  with 
abundant  wealth  is  allowed  to  exist  ?     Why,  because  the 
people  are  still  frightened  by  that  bugbear,  "  overpro- 
duction " — one  of  the   greatest  fallacies  that  ever  ema- 
nated from  the  human  brain.  I  deny  positively  that  there 
can  be  such  a  thing  as  over-production — that  is,  as  a  na- 
tional  evil.     There  may  be  loss  to  individuals  if  they 


NATIONAL    PROSPERITY.  24I 

produce  more  of  any  particular  commodity  than  is  re 
quired — that  is,  to  sell  at  a  profit  ;  goods  can  always  be 
disposed  of  at  some  price.  Therefore  there  is  not  an 
excess  of  goods,  but  an  excess  for  the  class  that  can  pay 
a  certain  price  for  the  same.  But  national  depression  is 
caused  by  "  collective  under-production."  The  distrib- 
uting classes  are  idle.  The  money  is  not  needed,  and 
remains  uncalled  for  at  the  banks,  because  there  have 
not  been  the  commodities  made  that  usually  require  to 
be  exchanged.  The  power  of  purchase  rests  solely  with 
the  commodities.  To  put  life  into  stagnant  trade,  set  in 
motion  the  mills  and  factories  that  have  been  closed,  or 
worked  on  a  smaller  scale.  Produce,  produce,  but  not 
madly,  thoughtlessly,  the  goods  there  are  buyers  for. 
If  all  would  produce  to  the  extent  of  their  power, 
there  would  be  a  general  demand  for  all  things.  Re- 
member, goods  buy  money  ;  and  the  money  gives  the 
power  to  buy  other  goods.  But  now  comes  the  import- 
ant point — one  that,  whether  overlooked  by  the  individ- 
ual or  the  nation,  means  paralysis,  stagnation,  ruin.  The 
essential  thing  is  to  produce  such  things  as  will  cause 
immediate  reproduction,  and  only  to  invest  year  by  year 
the  surplus  capital  in  articles  of  luxury,  or  in  those  pro- 
ductions that  do  not  recoup  you  for  the  outlay  till  some 
distant  period.  For  years  we  have  gone  on  recklessly 
investing  our  capital  in  foreign  loans,  foreign  railways, 
aye,  and  every  scheme  that  ingenious  promoters  have 
been  able  to  conceive.  This  wealth,  I  admit  brings,  in 
the  shape  of  interest,  tribute,  which  finds  its  way  to  this 
country  in  the  form  of  commodities  ;  and  some  argue 
that  the  fact  of  our  being  able  to  import  so  largely  is  a 
gpod  sign  of  the  national  wealth,  and  that  this  excess  of 


242  MONE  V. 

imports  is  not  a  drain  on  the  resources  of  the  nation,  but 
a  consequence  of  the  greatness  of  those  resources.     The 
argument  is  good  so  far  as  it  goes,  but  we  are  consider- 
ing the  depression  of  trade,  and  the  power  of  our  wealth 
does  not,  has  not  removed  that.    It  seems  to  me  that  the 
depression  is  mainly  caused  by  so  large  an  amount  of  our 
capital  having  been  sent  away  /or  others  to  use,  to  pay  us 
in  their  commodities  for  the  use  thereof,  when  the  money 
ought  to  have  been  employed  in  producing  ourselves,  and 
so  enriching  the  nation  by  exporting  our  excess  of  pro- 
duction, instead  of  importing  the  excess  of  other  peo- 
ple's.   We  have  got  into  the  condition  of  the  spendthrift, 
who  consumes  and  destroys  more  than  he  can  replace. 
As   a  nation,   collectively,   we   are   "  over-consuming "  ; 
that  is,  we  are  letting  other  people  produce  ;  we  are  con- 
suming their  productions,  and  not  replacing  them  by  our 
own  productions.     We  are  living  too  much  on  interest, 
paid   by   the  products  of  other  nations  ;    and  by   not 
wisely  using  the  money  ourselves,  we  have  got  into  the 
condition  of  having,  in  proportion  to  the  population,  a 
smaller  quantity  of  commodities  to  exchange.  This  is  one 
of  the  principal  causes — this  "  over-consumption  "  and 
"  under  production  " — why  trade  is  stagnant,  mills  para- 
lyzed, and  money  lying  idle,  unasked  for,  in  our  banks, 
— a  cause,  if   not  removed,  that  must  ultimately  bring 
the  nation  to  poverty.    To  meet  the  famines  of  the  East, 
the  bad  harvests,  the  enormous  waste  of  war,  our  increas- 
ing number  of  "  unproductive  workers  "  in  the  army  and 
navy,  etc.,  and    the   wonderful  but    excessive   develop- 
ment of  railway  and  house-construction,  needs  the  con- 
centrated   energy    of    the    nation,    of   its   thinkers   and 
workers,  with  a  view  to  producing  an  increased  quantity 


NATIONAL   PROSPERITY.  243 

of  such  articles  and  products  as  will  lessen  the  evil  effect 
of  this  over-consumption.  We  must  use  our  brains  more, 
not  go  on  as  recklessly  in  our  undertakings  as  the  unciv- 
ilized savage  we  are  so  prone  to  ridicule.  Look  how 
madly  we  took  up  railways  !  Admitted  that  in  the  long 
run  they  are  invaluable  to  a  nation — nay,  enrich  it  as 
much  as  any  cause, — but  we  condemn  as  a  fool,  as  a 
criminal,  the  trader  who  takes  the  life-blood  of  his  busi- 
ness, and  locks  up  in  dead  stock,  book  debts,  or  building 
operations,  his  money — who  does  not  know  that  the 
necessary  "  floating  capital  "  must  never  be  used  as 
"  sunk  "  capital,  but  only  the  surplus  capital  at  his  com- 
mand. So  with  the  nation  and  railways,  or  any  under- 
taking of  a  similar  nature  ;  they  represent  a  gigantic 
over-consumption,  not  out  of  the  surplus  savings,  but 
out  of  the  floating  capital  of  the  country,  that  at  the 
time,  through  being  engaged  in  recklessly,  brings  the 
nation  into  poverty,  commercial  depression,  and  much 
misery.  "  P.  Q."  sent  the  following  figures  to  the  Times, 
August  20,  1879,  and  suggests  that  the  time  has  come  for 
the  further  extension  of  Indian  railways  without  the  aid 
of  a  government  guaranty.  Look  at  the  total  spent  upon 
the  railways  of  England  and  India,  and  think  for  a  mo- 
ment that  the  construction  of  these  works  means  in  re- 
ality the  consumption  of  so  much  corn,  food,  clothing  to 
the  men,  coals,  iron,  and  other  substances  for  the  works  ; 
you  will  then  see  how  necessary  "  caution  "  is  to  the  na- 
tion, before  adding  to  its  sunk  capital.  (See  next  page.) 
The  percentage  on  capital  proves  railways  to  be  a  fair 
field  for  "permanent  investment."  The  care  needed  is, 
not  to  construct  needless  lines,  and  to  get  value  for  the 
money  that  must  be  spent.     You  will  perceive  that  the 


244 


MONE  V. 


railways  of  England  have  cost  six  times  as  much  to  pro- 
duce double  the  length  of  lines  in  India. 


Railways  of  England. 


Year.  Capital. 


0.° 

0)  2-- 

1/1  or) 
o   4> 

O 


i  o 

I" 


I87I.    .;;^ 461, 400,000.    .      9-0     .    .     4"8 

1872..  473,600,000..  9'5  ..  4"9 

1873..  490,000,000.  .lO'o  ..  4'7 

1874..  506,700,000..  9"9  ..  4"5 

1875..  527,100,000..  9-8  ..  4-5 

1876..  544,800,000..  9'6  ..  4"4 

1877-  •  557,900,000.  9-5  ..  4-4 

1878..  570,800,000..  9'3  ..  4*4 

Total  miles  completed  in  1878,  12,229. 


Railways  of  India. 


Year.         Capital. 


u 


«  ■ 


t/1    u{.J 


■i-i   O 

u. 

.-    4)  — 

o  rt  ^^ 


O 


7'i 


1871.  .;i^87,687,ooo  . 

1872.  .  90,184,000  . 
1873. .  90,666,000  . 
1874..  91,354,000. 
1875. .  92,442,000  . 
1876..  93,393,000  . 
1877. .  94,108,000  . 
1878..  95,431,000  . 

Total  miles  completed  in  1878,  6,044 


7 
7 
8' 

7 

9 
II 

I0"0 


3"i 

3'i 
5-3 
4'3 

3-9 

4-8 

6-5 
5"2 


It  must  always  be  remembered  that  by  our  mad  eager- 
ness, or  thoughtless,  reckless  manner  in  these  and  other 
schemes,  the  immense  demand  for  food,  coal,  iron, 
engines,  and  material  kindles  great  excitement  in  the 
factories  and  the  shops  ;  profits  share  the  upward  move- 
ment ;  luxurious  spending  overflows  ;  prices  advance  all 
round  ;  and  labor  has  to  be  paid  a  higher  monetary 
value  to  enable  the  laborer  to  obtain  the  old  quantity  of 
food.  So  that  it  is  not  only  the  wealth  that  is  sunk  in 
making  the  railways,  but  we  have  to  suffer  for  our 
thoughtlessness  in  the  higher  prices  of  all  things,  through 
the  recklessness  of  a  false  feeling  of  prosperity — in  reality, 
a  national  curse, — a  retribution  for  its  folly  in  a  general 
feeling  of  waste  and  recklessness  and  national  extrava- 
gance. Take  the  result  on  Germany  of  the  war  in- 
demnity received  from  France.  How  severely  nature 
punishes  tyranny  !     Their  seemingly  boundless    wealth 


NATIONAL  PROSPERITY.  245 

produced  an  "  over-consumption."  The  nation  destroyed 
more  than  it  re-made  ;  it  diminished  wealth  rapidly. 
The  people  were  blinded  for  a  time  by  increased  activity 
of  trade,  by  great  commercial  prosperity,  although  the 
nation  was  on  the  road  to  ruin.  There  is  only  one  way 
for  a  nation  to  prosper — to  produce  in  excess  of  their 
consumption.  Our  habits  have  altered  in  the  last  fifty 
years.  Our  forefathers  produced  much,  consumed 
little,  and  saved.  We  have  crippled  our  resources  by 
consuming  out  of  proportion  to  our  production.  We 
have  killed  so  many  of  our  geese  that  used  to  lay  the 
golden  eggs.  We  must  realize  as  a  fact  that  we  cannot 
have  the  cake  and  eat  it  too  ;  or  rather,  that  if  we  want 
to  have  the  cake  again  to-morrow,  we  must  do  to-day 
some  work  that  will  cause  its  reproduction.  We  must 
teach  the  operatives  it  is  "  over-time,"  not  "  short-time," 
that  is  wanted.  We  produce  too  little,  and  at  too  costly 
a  rate.  Short  time  means  dearer  goods.  Trade  is  bad 
always  where  the  power  of  the  buyer  is  limited,  less  than 
it  was.  The  remedy  is  more  goods,  which  means  cheaper 
goods — produce,  which  is  identical  with  the  power  to 
purchase.  There  is  a  cause  for  all  things.  No  depres- 
sion ever  did,  ever  will,  occur  without  a  reason  ;  and  it 
can  only  be  permanently  got  rid  of  by  the  removal  of 
its  cause — best  got  at  by  thought,  patience,  industry, 
thrift,  sobriety,  and  a  readiness  on  the  part  of  all  to  sell 
their  labor  at  the  market  price,  and  add  daily  to  the  pro- 
duction of  the  country  to  the  utmost  of  their  power.  To 
produce  thrifty  habits,  it  is  very  important  that  the  value 
of  interest  be  explained  to  the  young.  To  know  that 
money  has  the  power  of  adding  to  itself  if  properly  used, 
is  a  fact  every  child  should  understand  ;  but  the  thought 


246  MONE  y. 

as  to  money  needs  being  extended  far  beyond  the  mere 
fact  of  its  value  if  wisely  invested,  or  its  use  as  a  medium 
of  exchange.  We  want  the  people  to  comprehend  that 
real  wealth  consists  in  the  increased  power  of  produc- 
tion, that  the  increase  of  gold  by  a  nation  is  nothing  in 
comparison  to  an  increased  power  to  produce  commo- 
dities. 

Trade  should  be  quite  free  ;  there  should  be  no  artifi- 
cial restriction  upon  the  individual  or  the  nation  ;  leaving 
the  consumer  to  buy,  the  producer  to  sell,  when  it 
seems  best  for  either  to  do  so.  Taxing  commodities  is 
an  error  of  judgment,  inasmuch  as  it  restricts  the  opera- 
tion of  the  natural  law,  that  all  mankind  will  study  their 
own  interests  and  buy  where  they  can  best  be  served. 
Free  trade  benefits  all,  but  the  man  of  fixed  income 
mostly.  For  instance,  in  the  year  1867-8  we  imported 
8,000,000  quarters  of  wheat  ;  in  1877-8  we  imported 
13,000,000  quarters,  or  5,000,000  more  quarters — a 
greater  proportion  than  the  increase  in  the  population 
needed.  The  result  was,  of  course,  cheap  bread  to  the 
man  deriving  his  income  from  invested  capital,  or  to  all 
those  with  fixed  incomes  positively — to  many  of  the 
laboring  classes,  also,  an  increase.  But  this  large  increase 
in  the  quantity  of  wheat  imported  led  to  unprofitable 
farming,  which  means  decreased  rents,  and,  being  at  a 
time  of  depressed  trade,  reduced  wages  ;  but  the  re- 
duced wages  were  inevitable  in  many  branches  of  indus- 
try from  other  causes,  and  this  cheap  bread  materially 
diminished  the  general  distress  of  the  country.  So  free 
trade  seems  to  work  in  accordance  with  the  principle  of 
the  greatest  good  to  the  greatest  number  ;  and  this  must 
be  the  wisest  policy  for  all  nations. 


NATIONAL  PROSPERITY.  247 

The  following  words  of  wisdom  by  that  clear-headed, 
practical  statesman,  Richard  Cobden,  should  be  stamped 
upon  every  Englishman's  brain  : 

"  Upon  the  prosperity  of  the  manufacturing  interest 
hangs  our  foreign  commerce  ;  on  which  depends  our 
external  rank  as  a  maritime  state  ;  our  customs'  duties, 
which  are  necessary  to  the  payment  of  the  national 
debt  ;  and  the  supply  of  every  foreign  article  of  domes- 
tic consumption,  every  pound  of  tea,  sugar,  coffee,  or  rice, 
all  and  the  other  commodities  consumed  by  the  entire 
population  of  these  realms.  In  a  word,  our  national 
existence  is  involved  in  the  well-being  of  our  manu- 
facturers. 

'*  If  we  are  asked.  To  what  are  we  indebted  for  this 
commerce  ?  we  answer,  in  the  name  of  every  manufac- 
turer and  merchant  in  the  kingdom  :  The  cheapness 
alone  of  our  manufactures.  Are  we  asked.  How  is  this 
trade  protected,  and  by  what  means  is  it  enlarged  ?  the 
reply  still  is  :  By  the  cheapness  of  our  manufactures.  Is 
it  inquired  how  this  mighty  industry,  upon  which  de- 
pend the  comfort  and  existence  of  the  whole  empire, 
can  be  torn  from  us  ?  we  rejoin  :  Only  by  the  greater 
cheapness  of  the  manufactures  of  another  country." 

Practically,  we  want  all  products,  for  their  quantity  in 
relation  to  money,  so  to  develop  as  to  be  cheaper,  or 
rather,  be  supplied  to  the  consumer  in  larger  quantities 
for  the  same  amount  of  money.  This  result  some  still 
think  can  be  best  done  by  a  system  of  protection,  as 
they  say  free  trade  has  destroyed  the  benefits  it  seems  to 
yield  by  letting  in  money  as  well  as  commodities.  Is  it 
so  ?  Yes,  partly  ;  it  is  one  of  those  specious  half  truths 
many  are  so  fond   of.     Undoubtedly  free  trade  has  in- 


248  MONEY. 

creased  the  stock  of  gold,  and,  to  a  certain  extent,  has 
indirectly  kept  up  the  prices  of  articles  ;  its  principal 
mission  would  seem  to  be  to  cheapen.  But  the  more 
gold,  the  greater  demand  for  articles.  The  demand 
causes  supply,  and  supply,  as  a  rule,  has  a  tendency  to 
exceed  the  demand.  The  price  of  an  article  will  de- 
pend on  its  supply  in  proportion  to  the  money  seeking 
to  purchase  it.  If  the  gold  be  kept  at  a  fixed  quantity, 
and  the  products  increase  threefold,  to  effect  an  ex- 
change, the  gold  will  secure  for  itself  three  times  as 
much  as  heretofore  ;  hence  gold  is  argued  to  be  dear, 
and  goods  cheap.  On  the  other  hand,  the  increased  in- 
flux of  goods,  unless  there  be  an  increased  supply  of 
commodities  in  comparison,  will  cause  the  goods,  being 
less  proportionally  to  the  gold  demanding  to  be  ex- 
changed for  them,  to  be  relatively  dearer,  or  of  a  higher 
money  value,  than  heretofore.  But  the  real  point  to 
comprehend  is — the  money  price  of  an  article  or  labor 
is  quite  immaterial — the  real  point  is,  what  the  money 
will  produce  or  exchange  for  at  one  time  as  against  an- 
other. No  one  can  doubt  that  free  trade  has  lessened 
the  real  price  of  nearly  all  articles  alike  of  necessity  and 
luxury,  and  that  the  lower  and  middle  classes  of  society 
enjoy  in  1880  an  amount  of  social  comfort,  and  are  able 
to  purchase  a  great  many  articles  that  were  not  within 
their  reach  in  1840  ;  and  this  will,  must,  continue,  as 
there  is  not  the  slightest  reason  why  an  ounce  of  gold 
should  not  exchange  for  double  the  quantity  of  any 
goods  which  it  now  purchases,  except  for  the  fact  that 
gold  would  then  be  worth  half  as  much  again  relatively 
to  other  things  as  it  now  is.  Now,  this  is  what  invention, 
improved  machinery,  better   and   cheaper   facilities   of 


NATIONAL   PROSPERITY.  249 

carriage  and  distribution,  and  free  trade  really  accom- 
plish :  they  give  to  the  sound  stationary  article,  gold, 
more  goods  in  exchange,  or,  as  it  is  termed,  lessen  the 
cost  to  the  consumer  ;  and  our  efforts  should  always  be 
directed  to  this  end,  as  one  shilling  can  just  as  easily 
"  circulate  "  the  same  amount  of  goods  as  it  is  supposed 
that  it  takes  a  crown  to  move.  To  understand  this  sub- 
ject, you  must  remember  thaLwhen  we  talk  of  the  cheap- 
ness or  dearness  of  goods — whether  we  intend  it  or  not 
— the  language  we  use  means  cheapness  or  dearness  as 
measured  against  gold,  for  we  have  no  other  standard.  It 
is  only  by  cost  in  money  that  any  comparison  can  be  in- 
stituted. Why,  for  instance,  can  wheat  be  grown  in 
South  Australia  at  a  profit  on  land  that  does  not  yield  on 
an  average  more  than  twenty  bushels  per  acre,  and  where 
wages  are  six  shillings  per  day  ;  and  not  only  at  a  profit 
in  the  colony,  but  that  it  can  be  taken  to  England  and 
there  compete  successfully  with  wheat  produced  from 
land  four  times  as  fertile,  cultivated  by  laborers  not  get- 
ting a  fourth  of  the  money  wages,  and  certainly  not  liv- 
ing half  as  well  as  their  fellows  in  South  Australia?  The 
natural  facilities  in  land  and  labor,  the  primary  neces- 
saries for  the  production  of  wheat,  are  incomparably 
superior  in  England  ;  and,  according  to  commonly  re- 
ceived doctrines,  what  I  have  stated  ought  to  be  impos- 
sible, but  it  is  the  fact.  The  true  explanation  is,  simply 
that  the  Australian  wheat  does  not  cost  so  much  in 
money  to  produce,  and  peculiarity  of  climate  enables 
machinery  to  be  used  for  reaping,  which  saves  money 
which  must  otherwise  be  paid  for  labor.  But  the  fact  is, 
that  we  delude  ourselves  when  we  suppose  that  these 
questions    are   settled   altogether  by   imagined   superior 


250  MONEY. 

facilities  of  countries  for  producing  this  or  that  com- 
modity. There  are  artificial  causes  at  work  ;  for  in- 
stance, land  there  is  almost  rent  free,  land  here  is  ruin- 
ously dear.  It  is  becoming  every  year  more  evident  that 
England  cannot  compete  with  America  in  the  raising  of 
wheat  ;  and  that  the  high  price  of  meat,  which  has 
hitherto  helped  our  farmers,  will  now  be  altered  through 
the  largely  increasing  quantity  of  meat  America  is  ex- 
porting here.  Our  farmers  in  1880  are  literally  being 
driven  out  of  their  farms,  it  being  impossible  for  them 
to  compete  with  the  Americans  and  pay  the  present  high 
rents.  One  thing  is  certain,  farmers  cannot  pay,  and 
unless  trade  improves  it  will  be  impossible  for  the  trad- 
ing class  to  pay  the  present  rents.  The  time,  therefore, 
seems  ripe  for  a  readjustment  of  this  rental  question. 
Shop  property  reached  fabulous  prices  during  the  pros- 
perous years,  or  the  seemingly  prosperous  years,  with 
much  of  its  fictitious  business.  But  with  lesser  trade, 
and  a  smaller  rate  of  profit,  from  the  competition  of  the 
stores,  the  question  of  rents  and  taxes  must  be  considered, 
for  rents  will  inevitably  have  to  be  decreased,  in  union 
with  trade  restrictions.  The  landlord  has  no  more  right 
to  larger  profits  when  all  others  concerned  have  to  be 
satisfied  with  less.  By  the  natural  law,  rents  must  fall, 
or  houses  remain  longer  empty.  But  we  want  more  than 
this, — we  want  the  landlord  to  be  treated  by  the  law  like 
any  other  creditor  ;  we  want  this  relic  of  the  feudal 
ages,  this  preference  for  the  interests  of  a  class,  abolished. 
We  are  told,  in  the  eyes  of  the  law  all  are  equal  ;  we 
want  this  to  be  the  fact.  The  game  laws  are  a  disgrace 
to  us  in  1880.  1  fail  to  see  why,  when  a  man  fails,  the 
landlord  is  to  get  20s.  in  the^,  and  the  creditors  noth- 


NATIONAL  PROSPERITY.  25  I 

ing.  Laws  should  be  made  for  the  good  of  all.  If  there 
be  any  favor  shown,  let  it  be  to  the  poor,  as  they  spend 
as  consumers  nearly  all  they  earn  as  producers.  I  there- 
fore advocate  law,  cheap  and  expeditious,  clear  and  de- 
cisive, and  an  end  to  the  delay,  subtleties,  and  modern 
jugglery  of  appealing  and  going  from  court  to  court ; 
law  to  protect  the  interest  of  all,  and  united  action  to 
remove  and  stop  protection  to  the  interests  of  the  few  ; 
liberty  to  use  my  capital  invested  in  machinery  as  and 
when  I  please — liberty  for  the  laborer  to  use  his  capital, 
his  "labor,"  when  and  how  he  pleases.  We  want  to  be 
free  from  the  interference  of  the  law  that  relieves  a  bank- 
rupt, honest  or  dishonest — a  law  that  tempts  men  to  be 
dishonest,  by  releasing  them  from  the  consequence  of 
their  own  follies  or  crimes  ;  free  from  this  "  indulgent  " 
legislation,  that  puts  the  burden  of  some  people's  short- 
comings upon  the  shoulders  of  others.  Our  system  leads 
to  "  national  improvidence  "  :  if  A  eats,  and  has  not 
earned  what  he  eats,  he  is  a  tax  upon  society,  and  living 
on  the  labor  of  another.  As  regards  education,  every 
one  should  be  able  to  read  and  write  ;  but,  to  my  mind, 
legislation  diffuses  a  subtle,  dangerous  poison  amongst 
the  people,  when  it  enforces  the  right  of  a  child  of  A  to 
be  taught  at  the  expense  of  B.  The  same  with  the 
"  poor  law  "  ;  relief  should  only  be  given  to  the  sick, 
incapable,  or  aged,  and  even  then  discouraged  to  the  ut- 
most ;  and  the  rule  rigidly  enforced  that  no  man  has  a 
right,  either  morally  or  legally,  to  be  maintained  out  of 
the  labor  of  others.  It  lowers  the  self-respect  of  a  peo- 
ple, having  a  system  that  tempts,  solicits  men  to  forego 
their  duty  to  themselves,  their  wives,  their  children,  their 
fellow-men.     I   would  have  every  man  trained  to  feel 


252  MONEY. 

there  is  no  more  degraded  being  than  he  who  can  only 
exist  by  being  a  charge  upon  the  community — living,  by 
the  aid  of  the  law,  out  of  the  hard  earnings  and  savings 
of  the  more  provident.  Our  system  tempts  men  to  be 
thoughtless  and  thriftless,  by  educating  their  children, 
and  by  promising  them  a  house  of  refuge  when  old  or 
incapable  for  work  ;  whereas  all  the  efforts  of  wise  legis- 
lation should  be  to  teach  men  how  to  earn  a  living,  what 
business  is,  what  true  morality  is, — how  true  happiness  is 
to  be  obtained,  what  money  is,  how  to  get  it,  the  import- 
ance of  taking  care  of  it,  by  saving  and  wise  use  thereof, 
— how  to  maintain  their  independence  as  men,  and  be 
too  proud  to  accept  relief  of  their  fellow-men,  whether 
the  same  be  sanctioned  by  law  or  not. 

Spite  of  abnormal  causes,  as  high  rents,  etc.,  neutral- 
izing the  otherwise  natural  advantages  of  one  country  to 
compete  with  another,  there  can  be  no  doubt  that  Provi- 
dence has  endowed  nations  with  special  facilities  ;  that 
one  people  admirably  gifted  for  working  in  metals  are 
not  equally  so  for  making  cloth  ;  that  others  having  pe- 
culiar advantages  for  growing  food  cannot,  without 
infringing  natural  laws,  turn  their  attention  to  weaving 
calicoes.  We  can  all  do  some  things  better  than  others. 
But  every  one  should  be  taught  why  free  trade  is  so 
superior  to  protection — simply  because  it  is  more  profit- 
able ;  as  well,  that  it  is  wiser  to  exchange  with  each 
other  than  to  produce  a  thing  at  higher  cost  than  it  can 
be  bought  for.  For  instance,  if  I  can  buy  a  hammer  for 
a  shilling,  you  will  perceive  at  once  how  foolish,  how  in- 
sane I  should  be  if  I  persisted  in  shutting  myself  up,  and 
saying  :  No,  I  shall  make  it  myself,  although  it  cost  me 
double ;    or   wanting  all    my  neighbors   to  pay  double 


NATIONAL   PROSPERITY.  253 

price  because  of  my  self-persistence  in  making  hammers 
at  the  expense  of  the  community,  instead  of  using  my 
faculties  in  a  more  profitable  way.  It  would  be  really 
more  to  the  advantage  of  a  nation  to  keep  a  trade  in 
idleness  than  to  protect  its  special  product  by  shutting 
out  another  because  it  is  cheaper,  or  taxing  it  to  make  it 
equally  dear  ;  because  allied  to  the  freedom  of  trade  is 
competition,  and  competition  is  essential  to  protect  man 
from  the  selfishness  of  his  fellow-man.  Both  forces  may 
at  times  seem  pushed  too  far,  and  so  as  to  work  with 
some  practical  inconvenience,  but  both  principles  are 
right  ;  they  are  godlike  in  their  actions — they  fight  for, 
and  secure,  the  benefits  for  the  many,  against  the  interests 
of  the  few.  There  is  not  a  man  or  company  in  existence 
but  would  charge  more  for  distributing,  carrying,  or  pro- 
ducing, if  there  were  not  the  dread  of  a  rival  competing 
for  and  taking  away  the  order.  So  trade  should  be  left 
free  to  buyer  and  seller. 

If  men  once  grasped  the  causes  of  "  national  pros- 
perity," this  question  of  "  protection  "  would  be  revolting 
from  its  very  hideousness.  Its  aim  is  to  compel,  by  the 
aid  of  law,  buyers  to  pay  more  for  goods  than  the  sellers 
are  naturally  entitled  to.  Competition  is  nature's  remedy 
to  protect  man  against  his  fellow-men  ;  to  keep  down 
the  value  of  a  man's  services  to  what  they  are  worth,  in- 
stead of  his  ideas  of  their  worth  ;  as  unfortunately  it  is 
too  true — 

"  How  quickly  nature 
Falls  to  revolt  when  gold  becomes  her  object." 

For  national  prosperity  we  want  no  "  reciprocity."  Free 
trade  is  a  law  of  nature,  founded  on  mutual  self-interest ; 


254  MONEY. 

if  the  principle  be  sound,  why  place  any  "restriction" 
on  its  operation  ?  Because  other  nations  are  foolish 
enough  to  break  the  laws  of  God,  are  we  to  follow  them 
in  their  stupidity  ?  By  free  trade  we  mean  that  each 
country  should  produce  freely  that  which  it  can  produce 
best  and  cheapest,  and  should  exchange  the  surplus  of 
what  it  produces  for  the  similarly  produced  products  of 
other  countries,  and  then  all  nations  are  benefited. 
Think  of  it,  analyze  it,  dissect  and  pull  it  to  pieces  as 
you  will,  it  is  impossible  to  find  a  flaw  in  it.  It  is  the 
law  of  God  ;  it  is  the  wisest  policy  for  the  material  and 
moral  benefit  of  mankind,  for  national  prosperity. 

CONCLUDING  REMARKS. 

"  The  price  of  wisdom  is  above  rubies." — Job. 
"  Wisdom  is  better  than  rubies  ...  is  more  precious  than  rubies." — 
Proverbs. 

Who  can  doubt  these  truisms,  true  for  all  times  ? 
Common-sense  is  the  great  thing  to  strive  for  ;  it  is  a 
term  full  of  meaning,  popularly  defined  as  applicable  to 
those  who  may  be  relied  upon  for  sameness  of  action. 
"  He  is  a  sensible  fellow,"  we  say  of  that  man  whose 
opinions  are  characterized  by  a  kind  of  intuitive  saga- 
city, arising  from  not  only  knowing  his  business,  but 
also  his  own  mind  in  relation  thereto,  and  a  resolution 
within  him,  after  thinking  the  matter  over  in  all  its  bear- 
ings, to  have  his  business  done  in  a  certain  manner. 
Such  men  are  credited  with  the  art  of  persuading  peo- 
ple, but  they  do  so,  not  from  humbugging  them,  but 
because  they  speak  from  knowledge  and  with  conviction, 
and  mean  the  truth  ;  and  their  earnestness  and  upright- 
ness succeed.     They  get  people's  confidence,  from  their 


CONCLUDING  REMARKS.  255 

quick  perception  and  prompt  action  ;  they  are  full  of 
expedients,  never  at  a  loss  what  to  do.  What  a  contrast 
such  men  are  to  those  who  never  have  an  opinion  of 
their  own,  cannot  decide  or  act  without  consulting 
others,  and  if  they  get  on  in  the  world,  it  is  by  knowing 
their  own  weakness  and  being  wise  enough  to  cling  to 
the  skirts  of  some  one  stronger  than  themselves.  Still, 
as  empty  bags  cannot  stand  upright,  believe  me  that 
every  man  that  makes  his  way  upwards  must  be  better 
than  his  competitors  in  some  way  ;  like  the  successful 
senator,  he  recognizes  the  fact  that  there  are  no  little 
people  ;  or  the  philosopher,  that  there  are  no  little  things. 
To  succeed,  a  man  must  see  things  as  they  are  ;  that  the 
world  is  a  huge  school,  wherein  the  dunces  get  punished 
most  severely,  and  even  the  best  and  brightest  do  not 
escape  the  rod.  The  value  of  wisdom  is  essential  to 
commercial  men  in  understanding  what  is  value.  It  is 
very  difficult  to  define  what  is  value  ;  that  is,  what  is 
"  cheap."  I  buy  a  lot  of  goods  to-day  that  seem  to  me 
much  under  value — that  is,  the  recognized  market  price 
for  similar  goods  ;  but  to-morrow,  when  offering  the 
same  to  a  buyer,  he  submits  other  goods  of  similar  char- 
acter he  has  bought  cheaper — that  is,  at  lower  prices. 
The  being  undersold  is  one  of  the  greatest  anxieties  of 
trade.  A  science  of  value  is  an  impossibility  ;  there 
cannot  be  a  science  of  a  subject-matter  whose  nature  is 
variable  and  capricious.  A  man  values  his  old  watch, 
which  he  has  no  wish  to  sell,  or  a  man  is  in  urgent  need 
of  money,  and  must  sell.  If  you  think  of  the  different 
values  of  the  watch  to  its  owner  under  such  dissimilar 
circumstances,  you  will  at  once  perceive  that,  unlike 
gravity  and  chemical  affinity,   value    is  subject   to   no 


256  MONEY. 

definite  laws  ;  yet  a  little  reflection  will  convince  you 
that  political  economists  are  right  in  stating  that  all 
articles  have  a  market  value,  and  that  their  prices  de- 
pend upon  supply  and  demand.  Trade  is  good, — men 
can  place  their  goods  as  quickly  as  they  are  produced  ; 
this  gives  an  elation  of  spirit,  an  independence  of  feel- 
ing, to  the  seller  ;  he  is  firm  as  regards  price,  and  objects 
to  any  deduction  from  what  he  thinks  should  be  his 
profit.  Trade  is  bad, — the  mills  must  be  kept  going, 
goods  are  produced  faster  than  they  can  be  placed  ; 
this  leads  to  what  is  called  "jobbing  " — viz.,  the  maker 
or  holder  offering  the  lot  at  a  considerable  reduction, 
and  submitting  to  deductions  in  claim  or  extra  discount 
pressed  upon  him  by  the  buyer,  according  to  his  judg- 
ment of  the  need  of  the  seller.  Or  let  us  consider  the 
most  legitimate  reason  for  concession,  or  deviation  in 
prices — viz.,  when  a  maker  offers  to  take  a  lower  price 
or  give  an  extra  discount  if  an  order  be  increased,  or  if 
it  be  beyond  a  certain  amount  in  quantity  or  value. 
This  concession  will  vary  according  to  the  state  of  trade 
— that  is,  according  to  the  power  of  supply  in  relation 
to  the  general  demand  ;  as,  if  trade  be  uniformly  good, 
the  manufacturer  can  find  orders  enough  without  having 
to  sacrifice  part  of  his  profit  to  induce  one  or  two  large 
buyers  to  order  more  than  they  would  be  disposed  to, 
except  at  a  reduced  price.  This  only  proves  that  the 
value,  or  rather  the  sellijig  price,  of  an  article  does  not 
depend  so  much  upon  its  quality,  or  make,  or  real  in- 
trinsic value,  as  upon  what  it  will  fetch  in  the  market 
when  it  is  offered  for  sale  ;  and  this  price  will  depend 
upon  the  aggregate  demand  for  it,  when  offered  for  sale, 
in  relation  to   the   collective   supply  at  the  time.     Take 


CONCLUDING  REMARKS.  2$^ 

another  illustration  of  the  uncertainty  of  value  :  a  trader 
is  going  along  seemingly  solvent  ;  his  balance-sheet, 
with  the  usual  fair  allowance  for  bad  debts  and  depre- 
ciation of  stock,  shows  a  satisfactory  balance  ;  but  he 
cannot  meet  his  bills,  and  has  to  call  a  meeting  of 
creditors  ;  his  affairs  are  investigated  ;  he  refuses  to  go 
on,  or  perhaps  the  creditors  will  not  let  him  ;  a  forced 
sale  of  his  stock,  fixtures,  lease,  takes  place,  and  his 
debtors  are  pressed  and  sued.  *'  Well,  we  find  by  pain- 
ful experience  that  the  value  of  every  20^-.  has  been  re- 
duced to  10^.  or  even  55."  Here  circumstances  mate- 
rially affect  values,  for,  if  the  business  had  kept  on,  the 
debtor  would  have  paid  20s.  for  every  -£,  as  the  stock 
which  had  been  bought  to  supply  his  customers'  wants 
was  worth  in  money  value  what  he  had  paid  for  it  ;  but 
which,  without  his  special  demand,  the  demand  not 
being  equal  to  the  supply,  and  the  sale  being  pressed, 
results,  as  in  the  forced  realization  of  the  book  debts,  in 
a  great  depreciation  in  the  value. 

The  value  of  economy,  of  thrifty  habits,  is  to  make 
man  self-dependent,  self-reliant,  and  give  him  the  glo- 
rious feeling  of  being  independent  ;  to  get  people  to 
have  the  common-sense  to  see  that  "  true  charity  "  is  to 
adopt  those  means  that  will  raise  the  object,  elevate  the 
people,  by  training  them  into  habits  of  self-help  ;  alms- 
giving binding  them  still  closer  in  the  chains  that  enthral 
them.  The  poor  law,  as  a  right  for  men  to  look  to  and 
rely  upon,  has  degraded  men  into  becoming  permanent 
pensioners.  There  is  no  hope  for  the  working  class  as  a 
body  until  they  are  taught  to  help  to  save  themselves. 
Put  the  matter  so  before  their  minds  that  they  cannot 
fail  to  see  that  much  of  their  misery  from  the  poverty 


258  MONEY. 

prevalent  in  their  midst  is  traceable  to  the  conduct  of 
those  who  suffer  most  from  its  consequences.  The  value 
of  money  must  be  explained  to  all.  The  stupidity  of 
living  up  to  one's  income,  the  crime  of  living  beyond  it, 
are  the  lessons  our  youths  of  all  classes  should  be  taught 
at  school  and  from  the  pulpit. 

"By  no  means  run  in  debt :  take  thine  owe  measure. 
Who  cannot  live  on  twenty  pounds  a  year 
Cannot  on  forty  ;  he  's  a  man  of  pleasure, 
A  kind  of  thing  that  's  for  itself  too  dear." 

George  Herbert. 

Credit. — There  has  been  an  inquiry  lately  into  the 
credit  system,  and  it  is  surprising  to  what  extent  the 
whole  human  race  lives  and  works  on  credit.  No  matter 
how  widely  nations  differ  in  the  scale  of  social  advance- 
ment— Siam,  Germany,  Canada,  St.  Petersburg,  or  Hono- 
lulu,— the  reports  show  that  90  per  cent,  of  the  business 
done  is  done  on  credit.  Belgium  is  progressive,  China  is 
stationary  ;  yet  in  Belgium  and  China  80  per.  cent  of  all 
commercial  transactions  are  credit.  In  France  and  Italy 
credit  is  used  with  most  moderation — in  the  one  because 
the  people  are  too  cautious  to  take  it  ;  in  the  other 
because  they  cannot  get  it  ;  but  even  in  France  and  Italy 
two  thirds  of  the  business  is  done  on  credit,  and  this  is  the 
lowest  estimate  anywhere,  except  in  Holland,  where,  as  it 
should  be  everywhere,  the  retail  trade  is  done  for  ready 
money,  and  the  wholesale  only  on  credit. 

Credit  is  a  wide  term,  and  the  giving  of  it  depends 
upon  the  condition  of  the  nation  or  individual  who  wants 
it.  It  is  justifiable  to  a  new  and  progressive  colony  like 
Victoria  ;  it  is  speculative  and  unwise  to  a  languishing 
empire  like  Turkey.    Credit,  as  a  matter  of  business  con- 


CONCLUDING  REMARK'S.  2^9 

venience,  upon  short  and  fixed  terms  is  justifiable,  but 
very  unwise  and  dangerous  under  a  system  of  long  and 
indefinite  terms.  Credit  is  justifiable  when  given  to 
enable  a  manufacturer  or  merchant  to  carry  on  his  trade  ; 
it  is  wrong  and  mischievous  when  used  for  the  necessaries 
of  life.  Credit,  in  fact,  is  justifiable  when  used  as  an  in- 
strument for  progress  and  development  ;  it  should  be 
looked  upon  with  great  suspicion  when  it  is  a  manifesta- 
tion of  poverty.  We  shall  be  told,  it  is  impossible  to  do 
without  credit.  To  this  I  have  always,  and  still  respect- 
fully demur,  so  far  as  regards  retail  transactions.  If  a 
man  wants  clothes,  furniture,  meat,  and  drink  he  ought 
to  have  the  money  wherewith  to  buy  them,  and  has  no 
right,  legally  or  morally,  to  buy  the  necessaries  of  life 
trusting  to  the  future  to  bring  him  the  money  to  pay  for 
them. 

To  those  who  say  that  ready-money  trading  limits  trade, 
I  reply,  trade  has  no  right  to  go  beyond  the  limits  of  the 
money  to  purchase  with.  What  is  the  ultimate  benefit 
of  anticipating  next  week's  purchases  by  giving  the  buyer 
credit,  instead  of  waiting  until  next  week,  when  he  could 
buy  with  money  instead  of  on  credit?  There  is  a  limit 
to  the  purchasing  power  of  every  man  ;  if  you  tempt  him 
beyond  it,  by  giving  him  credit,  you  must  ultimately  suf- 
fer by  ruining  him,  and  having  to  bear  the  loss.  For  a 
time  trade  would  be  discouraged,  but  would  soon  right 
itself,  and  be  much  better  afterwards,  if  the  retail  trade 
of  the  kingdom  were  done  entirely  upon  the  cash  system. 
This  is  how  the  credit  system  operates,  and  is  said  to  in- 
crease trade  :  A  gets  into  debt  with  B  for  ten  pounds,  or 
a  hundred  pounds  ;  the  amount  is  immaterial  ;  whilst 
getting  into  debt,  or  rather  getting  things  without  paying 


26o  MONE  V. 

for  them,  he  is  able  to  spend  his  money  in  the  purchase 
of  other  articles  ;  so  that  <?/  Jirsf  he  has  an  increased 
power  of  purchase.  But  f//ere  the  advantage  ends,  alike 
to  himself  a.nd  the  development  of  trade  ;  because  when  he 
goes  to  B  again  to  buy  he  is  expected  to  pay  off  the  old 
debt  in  proportion  to  the  amount  of  his  new  purchases  ; 
so  that  if  it  was  decided  that  all  retail  trade  was  to  be 
for  cash  after  a  certain  date,  it  could  be  done  ;  existing 
debts  to  be  paid  off  by  instalments.  The  volume  of 
trade  would  only  be  lessened  to  the  extent  of  those  that 
buy  without  the  means  of  payment,  and  although  less  trade 
were  done,  tradesmen  would  be  better  off. 

I  have  been  an  advocate  for  cash,  or  short-fixed  credit, 
since  1862,  and  maintain  that  credit  for  necessaries  can 
be  abolished  if  those  who  serve  the  "  consuming  classes" 
will  be  firm  in  demanding  cash,  or  will  give  only  a  short 
fixed  term  of  credit  for  the  necessaries  of  life.  The  ad- 
vantages of  the  "  cash  system  "  are  obvious.  The  trades- 
man getting  his  money  is  independent  of  the  wholesale 
dealer.  "  Cash  "  is  an  "  open  sesame  "  anywhere,  every- 
where. The  wholesale  dealer  getting  his  money  more 
quickly,  with  less  risk  of  bad  debts,  can  do  with  a  smaller 
profit,  and  be  equally  independent  ;  and  so,  as  cash  pay- 
ments come  into  use,  credit  will  be  driven  out,  and,  as 
with  the  purchase  of  raw  produce  of  all  sorts,  cash  will 
eventually  suppress  credit.  But  we  must  begin  with  the 
laborer  and  consumer.  How  can  labor  be  independent 
if,  as  in  Turkey,  the  laborer  be  in  debt  to  his  employer  ? 
In  England,  tailors  borrow  during  the  week  of  their  em- 
ployers on  account  of  the  job  or  jobs  in  hand,  and  em- 
ployers borrow  on  Saturday  to  pay  the  week's  wages ; 
and   too  many  tradesmen  think  nothing  of  not  meeting 


CONCLUDING  REMARKS.  26 1 

their  bills  when  due  ;  pity  't  is  so  ;  and  strange  that  in 
this  land,  where  men  are  so  fond  of  boasting  of  their 
freedom,  so  many  voluntarily  enter  into,  and  remain  in, 
the  hard  fetters  of  modern  slavery — "  debt,"  caused  by 
"credit." 

It  will  be  said  :  "  But  men  go  into  business  to  make 
money,  and  more  money  was  made  in  trade  by  the  system 
o(  credit  than  that  of  ready  money."  By  the  credit  sys- 
tem men  made  or  lost  money.  By  the  cash  system  less 
is  made,  but  there  are  fewer  failures.  What  a  contrast 
in  the  two  systems  !  With  the  credit  system,  there  is  the 
uncertainty  of  meeting  one's  payments  —  a  perpetual 
source  of  anxiety,  that  undermines  the  health,  and  takes 
away  all  peace  of  mind.  And  to  make  credit  pay,  there 
is  but  one  way — Peter  must  pay  for  Paul  ;  and  it  is  not 
pleasant  to  be  charging  the  man  that  pays  you,  too  much 
because  of  the  man  or  men  who  do  not  pay.  Great 
wealth  has  been  made  in  the  past,  is  being  made  in  the 
present,  by  men  who  charge  credit  prices,  yet  are  shrewd 
enough  to  make  the  minimum  of  loss  ;  others  more 
trustful  or  hopeful  are  ruined.  But  putting  aside  the 
question  as  to  which  system  is  the  more  profitable  to  the 
tradingclasses,  I  unhesitatingly  condemn  "credit,"  except 
to  wholesale  dealers,  as  wrong  and  demoralizing  to  those 
who  take  it,  and  ask  tradesmen  to  be  firm  in  refusing  to 
give  credit  for  the  necessaries  of  life,  and  consumers,  for 
their  own  sake,  pecuniarily  and  morally,  to  be  self-deny- 
ing enough  to  abstain  from  purchasing  until  they  can 
pay  cash. 

The  cash  system  is  not  liked  by  those  tradesmen  who 
rely  on  the  hold  "  being  in  their  debt "  gives  them  over 
their  customers  ;  but  the  cash  system  is  the  right  one, 


262  MONE  v. 

and  must  develop,  as  it  has  the  approval  of  all  honest 
men,  and  is  to  the  advantage  of  those  whose  means  are 
most  limited — the  salaried  and  wage-earning  classes. 
That  system  must  be  the  best  that  brings  the  necessaries 
of  life  within  the  reach  of  each  consumer  at  the  lowest 
possible  price  ;  the  few  must  suffer  for  the  many,  not  the 
many  for  the  few. 

There  is  a  revolution  in  our  midst — very  unpleasant, 
as  all  revolutions  are  to  those  that  lived  out  of  the  old 
system,  but,  as  all  improvements  are,  greatly  to  the 
benefit  of  the  nation,  if  adverse  to  some  individuals. 
The  Suez  Canal  has  quite  altered  the  Indian  trade  ;  the 
middlemen  who  used  their  capital  in  giving  the  long 
credit,  that  was  formerly  wanted,  are  no  longer  required, 
Bills  on  India,  or  drawn  in  India  on  London,  were 
formerly  at  ten  months'  sight,  then  six  months  ;  now  six 
months  is  no  longer  necessary  for  genuine  trade  ;  and  as 
you  shorten  the  length  of  credit  required,  you  introduce 
a  different  class  of  distributers,  or  in  many  cases  do 
without  their  aid  altogether.  To  understand  any 
change,  you  must  get  at  the  cause.  The  consul  at 
Monte  Video  says  of  Uruguay  :  "  The  cause  and  origin 
of  such  long  credit  may  be  explained  by  the  long  time 
required  for  the  goods  bought  in  this  city  to  reach  the 
centres  of  distribution  in  the  camps  or  country  towns, 
and  the  long  time  the  country  dealer  has  to  wait  ere  he 
can  dispose  of  them  and  obtain  returns,  and  these  re- 
turns by  barter  as  frequently  as  by  cash."  When  these 
intervals  are  shortened  by  improved  communications, 
shorter  credits  naturally  follow,  and  middlemen  are 
doomed  to  pass  away  before  these  improved  facilities 
of  communication,   as  the  aborigines  had  to  disappear 


CONCLUDING  REMARKS.  263 

before  the  builders  of  cities.  This  doing  away  with  the 
"  middlemen  "  is  one  of  the  causes  of  low  prices — a 
cause  that  will  continue  to  operate.  In  a  recent  address 
at  Manchester  Mr.  Goschen  said  :  "  I  think  that  this  is 
the  case  in  the  Manchester  trade  as  well  as  it  is  in  other 
directions.  I  understand  that  formerly,  when  a  Man- 
chester spinner  wanted  cotton,  he  went,  generally  speak- 
ing, to  Liverpool,  Liverpool  went  to  New  York,  and 
New  York  went  to  New  Orleans  or  Savannah.  But  now 
the  spinner  goes  direct  to  the  producer,  and  many  inter- 
mediate profits  and  commissions  are  abolished.  Again, 
when  the  spinner  sells  his  goods,  I  am  told  that  there  is 
a  great  diminution  in  the  number  of  agencies  employed, 
and  that  often  business  is  conducted  for  a  ten-pound 
note  where  formerly  large  commissions  were  paid  to 
houses  who  were  agents  on  a  gigantic  scale.  You  all 
know  that  between  Manchester  and  India  there  has  been 
an  elimination  of  a  great  many  middlemen.  Now  as 
regards  London,  that  is  the  case  to  a  still  more  extra- 
ordinary extent.  Let  me  tell  you  how  the  cotton  trade, 
for  instance,  used  to  be  conducted  between  New  Orleans 
and  the  interior  of  Germany.  The  New  Orleans  man 
consigned  his  cotton  to  New  York  or  to  a  New  York 
house  ;  the  New  York  house  consigned  it  to  Liverpool, 
Liverpool  to  London,  London  to  Hamburg,  and  Ham- 
burg to  spinners  in  the  interior  of  Germany.  But  now 
the  German  spinner  goes  direct  to  New  Orleans,  and 
the  producer's  agent  visits  him  in  his  home,  and  a  num- 
ber of  intermediate  profits  and  commissions  are  swept 
away.  England  has  lost  a  great  i)ortion,  I  will  not  say 
of  its  transport  trade,  but  of  that  immense  department 
of  its  business  which  consisted    in  mediating  between 


264  MONE  Y. 

different  countries.  This  has  had  a  considerable  effect 
not  only  in  cheapening  produce,  but  also  in  affecting 
the  tone  and  temper  of  trade,  because  the  middlemen  of 
London — and  I  expect  it  is  the  case  here,  from  what  I 
have  heard — the  middlemen  and  agents  often  contributed 
largely  to  the  excitement  of  the  market.  In  Mincing 
Lane,  when  cargoes  of  sugar  were  sold,  one  cargo  would 
be  sold  four  or  five  times  over.  Then  the  brokers  would 
all  be  cheerful  ;  they  said  :  *  Here  's  a  brisk  business 
going  on,'  and  it  imparted  a  certain  buoyancy  to  the 
market,  and  there  appeared  to  be  great  vivacity  in  the 
trade.  I  hear  that  the  same  kind  of  thing  went  on  in 
Manchester  ;  that  there  were  houses  which  gave  a  cer- 
tain stimulus  and  impetus  to  trade  at  certain  times  by 
gigantic  speculative  operations."  Mr.  Goschen  went  on 
to  say,  that  "  if  business  is  quieter  for  want  of  these 
middlemen,  it  is  much  sounder,  and  that  it  is  really 
better  to  have  five  years  of  low  profits  than  four  years 
of  high  profits  and  a  crash  in  the  fifth,  although  few 
business  men  would  make  this  better  choice." 

"  Credit  "  is  a  matter  of  custom.  There  is  no  par- 
ticular reason  why  wool  should  be  bought  for  cash,  and 
woollen  goods  upon  credit.  A  great  deal  depends  upon 
whether  the  profits  to  be  made  will  draw  capital  to  in- 
vest in  this  or  that  article.  Unless  a  broker  be  rich 
enough  to  import  himself,  he  generally  sells  for  cash  ; 
but  in  some  countries  where  the  manufacturers  have 
little  capital,  manufactured  goods  are  sold  for  cash. 
The  native  manufacturers  of  Mexico  always  receive 
cash  for  their  goods,  and  the  Austrian  manufacturers 
are  in  the  habit  of  insisting  on  weekly  settlements,  in 
order  to  obtain  the  means  of  paying  their  workmen.    In 


CONCLUDTA'C  REMARK'S.  265 

England,  also,  the  same  rule  applies.  Small  makers  are 
compelled  to  ])art  with  their  goods  at  the  best  price  ob- 
tainable, in  order  to  pay  their  men's  wages,  or  meet 
their  bills — which,  no  doubt,  gave  origin  to  the  saying  : 
"that  you  can  buy  cheaper  than  you  can  make."  The 
same  applies  to  houses  ;  so  many  small  builders  cannot 
hold,  and  have  to  mortgage,  causing  so  many  houses  to 
be  sold  for  what  they  will  fetch,  that  it  is  cheaper  to  buy 
a  house  than  to  build  one. 

Credit  depends  on  the  time  that  it  takes  to  grow  prod- 
uce, to  manufacture  goods,  or  to  get  them  from  the 
manufacturer  to  the  consumer.  The  longer  time,  the 
more  capital  is  needed,  and  greater  help  in  the  shape  of 
credit.  The  time  occupied  in  bringing  raw  produce 
from  abroad,  and  in  the  distributing  of  produce  and 
manufactured  goods  is  much  less,  and  increased  facilities 
of  communication  have,  and  will  make  long  credits  less 
necessary  than  they  were.  Consul  Shaw,  of  Manchester, 
says  :  "  Credit  is  much  less  extensively  used,  both  in 
wholesale  and  in  retail  transactions,  than  it  was  ten  or 
twelve  years  ago.  In  wholesale  businesses  open  credits 
have  been  shortened,  and  prompt  payments  are  much 
more  frequent  than  they  used  to  be.  Then,  again,  the 
amount  of  bills  of  exchange  drawn  against  produce  or 
manufactures  transferred  to  buyers  is  much  less  than  it 
was  ten  years  ago."  This  point  is  strikingly  illustrated 
by  the  well-known  scarcity  of  "  trade  bills  "  in  the  Lon- 
don discount  market  during  the  last  three  or  four  years." 
The  latter  fact  is  partly  due  to  the  altered  method  of  do- 
ing business.  The  "  middle-man's  "  occupation  is  gradu- 
ally going.  When  the  manufacturer  sold  to  the  city 
merchant,  who  paid  him  by  a  bill,  and  the  tradesman 


266  MONE  Y. 

bought  through  the  city  merchant,  paying  him  by  bill, 
two  bills  were  in  the  market  being  discounted  ;  whereas, 
now  that  the  tradesman  buys  direct  from  the  manufac- 
turer, one  bill  is  sufficient.  This  change  of  system 
abolishes  at  once  "  half  the  trade  bills  "  that  used  to  be 
required. 

There  is  no  hope  for  the  man  who  is  content  to  stoop 
to  lift  the  coward's  weapon  of  self-defence,  and  put  upon 
fate,  chance,  or  circumstance  his  own  inability  to  protect 
himself.  It  is  his  own  weakness  he  has  to  conquer,  and 
boldly  lay  hold  of  seemingly  opposing  circumstances, 
and  mould  them  by  his  own  will  to  his  ultimate  advan- 
tage. It  can  be  done  ;  it  has  been  done.  What  other 
men  have  achieved,  why  not  you  ?  or,  if  not,  lay  the 
fault  upon  yourself  alone.  But  my  advice  is,  stand  up 
and  fight.  Determine  to  conquer  ;  determine  to  cast 
the  lie  back  into  the  teeth  of  all  scoffers  at  the  strength 
of  a  man's  will,  and  at  his  ability  to  use  every  circum- 
stance for  the  end  he  has  in  view.  They  are  cowards 
who  would  check  ambition  in  others,  because  they  have 
none  themselves.  Man's  moral  courage  wants  fostering, 
encouraging,  developing  ;  or,  like  any  other  attribute,  it 
will  fall  into  decay  for  lack  of  exercise.  That  the  ele- 
ment is  in  the  nature  of  every  man,  who  can  doubt  ? 
Unfavorable  conditions  have  prevented  its  development, 
and  it  requires  some  exterior  power  to  bring  it  into  ac- 
tion ;  but  the  moral  courage  of  every  man  will  exert 
itself  as  soon  as  he  is  properly  taught  the  value  of  a 
trained  intellect  ;  and  how  the  nerve-force  of  his  brain 
will  give  muscular  power  to  his  hand,  and  strength  to  his 
body  in  resisting  all  opposing  forces  to  his  progress. 
The   difficulties  of  life   are  but  trials  to  bring  out  the 


CONCLUDING  REMARKS.  267 

Strength  and  endurance  of  our  nature,  as  a  storm  tests 
the  powers  of  a  ship,  or  the  knife  of  the  cutter  reveals 
the  brightness  of  the  precious  stone.  Never  despair  ; 
though  fate  betray  and  re-betray,  with  inflexible  tenacity 
of  purpose  press  on,  ever  struggling  "  onwards  and 
upwards." 

"  The  height  by  great  men  reached  and  kept 
Were  not  attained  by  sudden  flight, 
But  they,  while  their  companions  slept, 

Were  toiling  upward  in  the  night. 
Nor  deem  the  irrevocable  past 

As  wholly  wasted,  wholly  vain, 
If,  rising  on  its  wrecks,  at  last 
To  something  nobler  we  attain  !  " 

Ladder  of  Si.  A  ugusdne. 


THE   END. 


PUBLICATIONS  OF  G.  P.  PUTNAM'S  SONS. 
ECONOMIC  AND  POLITICAL  SCIENCE. 

Recent  Important  Publications. 

American  Historical  Association.     Vol.  II.,  No.  i. — Report  ok  the 

Proceedings  oi-  the  American  Historical  Association  at  Wash- 
ington, April,  1886.     pp.  99 $1  00 

Vol.  II.,  No.  2. — h.    History   ok   the   Doctrine   ok   Comets.      By 
Andrew  D.  White,  Ex-President  of  the  Association,     pp.  43,  25 

Vol.   II.,    No.    3. — WiLLEM    UsSELINX,    FOUNDER    OK    THE    DtTCH    AND 

Swedish  West  India  Companies.  By  J.  F.  Jameson,  Ph.D.  pp.234. 

I  00 
The  same.     Vol.  I.     Octavo,  cloth,  gilt  top     .  .         .  5  00 

Contents.— \.  Report  of  the  Org.inization  and  Proceedings  of  the  American  Histori- 
cal Association,  at  Saratoga,  September  9-10,  1884.  By  Herbert  B.  Adams,  Secretarj'  of 
the  Association.  II.  An  Address  or  Studies  in  General  History  and  the  History  of  Civili- 
zation. By  Andrew  D.  White,  President  of  the  Association,  1884-5.  IH-  History  and 
Management  of  Federal  Land  Grants  for  Education  in  the  Northwest  Territory.  By 
George  W.  Knight,  Ph.D.  (University  of  .Michigan).  IV.  The  Louisiana  Purchase  in  Its 
Influence  upon  the  American  System.  By  the  Rt.  Rev.  C.  F.  Robertson,  Bishop  of  Mis- 
souri, v.  History  of  the  Appointing  Power  of  the  President.  By  Lucy  M.  Salmon 
(University  of  Michigan).  VI.  Report  of  the  Proceedings  of  the  American  Historical 
Association,  at  Saratoga,  September  8-10,  1885.  By  Herbert  B.  Adams,  Secretary  of  the 
Association. 

"  It  has  enrolled  among  its  members  some  of  the  most  distinguished  scholars  in  the 
field  of  history,  and  it  bids  fair  to  be  an  important  force  alike  in  awakening  interest  in 
American  history,  and  in  contributing  to  satisfy  the  interest  which  it  awakens." — Boston 
Journal. 

"  The  work  thus  far  accomplished  by  the  Association  amply  justifies  the  views  of 
its  founders,  and  is  of  so  much  value  that  no  careful  student  of  the  times  can  afford  to 
neglect  its  more  salient  features." — Boston  Literary  World. 

Atkinson.  The  Distribution  of  Products  ;  or,  The  Mechanism  and 
the  Metaphysics  of  Exchange.  Tliree  Essays.  What  Makes  the 
Rate  of  Wages  ?  What  is  a  Bank  ?  The  Railway,  the  Farmer,  and  the 
Public.  By  Edward  Atki.nson.  Second  edition,  revised  and  en- 
larged, with  new  statistical  material.       Svo,  cloth,  .         .  150 

"  It  would  be  difficult  to  mention  another  book  that  gives  soefTective  a  presentation 
of  the  present  conditions  and  methods  of  industry,  and  of  the  marvels  that  have  been 
wrought  in  the  arts  of  production  and  transportation  during  the  past  fifty  years." — .Adver- 
tiser^ Boston. 

Baker.     The  Federal  Constitution.     An  Essay.     By  John  T.  Baker, 

of  the  New  York  Bar.      i2mo,  cloth        .         .         .         .         .         i  00 

"  The  essay  is  particularly  valuable  to  young  men  as  a  compendium  of  our  political 
history." — Neiu   York  Commercial  Adz'ertiser. 

"  Furnishes  in  an  agreeable  and  convenient  form  for  reading,  just  at  this  time,  some 
leading  facts  relating  to  the  history  and  adoption  of  the  National  Constitution.  .  .  . 
The  comments  of  the  writer  are  sensible.^  7Vif  Nation. 

Bagehot.      Postulates  of  English  Political  Economy.      By  the  late 

Walter  Bagkhot,  with  an  introduclinn  by  Prof.  Alkred  MARSHALL. 

of  Cambridge,  England.     Cloth      .         .         .         .         .         .         T  00 

"  It  will  be  especially  valuable  to  those  who  have  already  some  clcmentarj-  '..nowl- 
edge  of  political  economy  ;  for  it  makes  more  clear  to  them  the  true  meaning  of  the  doc- 
trine laid  down  broadly  in  the  elementary  books,  and  will  suggest  the  qualitications  which 
must  be  attached  to  those  doctrines."— Prof.  F.  W.  Taussig,  Harvard  University. 


G.  P.   PUTNAM'S  SONS,  New  York  and  London. 

II 


PUBLICATIONS  OF  G.  P.  PUTNAM'S  SONS. 

Bascom.  Sociology,  A  Treatise.  By  John  Bascom,  President  of  the 
University  of  Wisconsin,  author  of  "The  Science  of  Mind,"  "  Prob- 
lems in  Philosophy,"  "  Esthetics,"  etc.      i2mo,  cloth     .  .  I   50 

"  Questions  of  immediate  moment  to  society  have  engaged  the  author's  chief  atten- 
tion. He  has  aimed  at  covering  a  large  field  suggestively  rather  than  a  narrow  field  ex- 
haustively.— New  York  Examiner. 

Bourne.     The  History  of  the  Surplus  Revenue  of  1837.     Being  an 

account  of  its  origin,  its  distribution  among  the  States,  and  the  uses 
to  which  it  was  applied.  By  Edward  G.  Bourne,  B.A.  Questions 
of  the  Day  Series,  No.  XXIV.     8vo,  cloth     .         .         .         .         i   25 

"  We  especially  commend  this  monograph  to  the  consideration  of  those  who  have 
been  captivated  by  Mr.  George's  schemes,  as  showing  what  usually  occurs  when  govern- 
ments undertake  to  expend  large  sums  for  the  benefit  of  the  public." — The  Nation. 

Cossa.  Taxation,  Its  Principles  and  Methods.  A  Translation  of  the 
"First  Principles  of  the  Science  of  Finance."  By  Professor  LuiGl 
Cossa,  Ph.D.,  of  the  University  of  Pavia.  Edited  with  notes  by 
Horace  White i  00 

Gneist.     The  Student's  History  of  the  English  Parliament,  in  its 

transformations  through  a  thousand  years,  being  a  popular  account  of 
the  growth  and  development  of  the  English  Constitution  from  800  to 
1887.  By  Dr.  Rudolf  Gneist,  author  of  the  "  History  of  the  Eng- 
lish Constitution,"  Professor  of  Law  at  the  University  of  Berlin.  For 
this  edition  an  entirely  new  translation  has  been  made  by  Prof.  A.  H. 
Keane,  B.A.,  F.R.G.S.,  Vice-President  of  the  Anthropological  Insti- 
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portant details.     Octavo,  cloth       .         .         .         .         .         .         3  00 

"Dr.  Gneist's  book  has  a  great  advantage  over  existing  treatises.  It  is  not  too 
much  to  say  that  Dr.  Gneist  is  indispensable  to  the  student  of  English  constitutional  his- 
tory."— London  Atkenceutn. 

"  They  cast  light  on  almost  all  the  great  questions  of  current  politics." — London 
Times. 

Hadley.     Railroad  Transportation  ;  Its  History  and  Its  Laws.     By 

Arthur  T.  Hadley,  Commissioner  of  Labor  Statistics  of  the  State 
of  Connecticut,  and  Instructor  of  Political  Science  in  Yale  College. 
8vo,  cloth I   50 

"  Prof.  Hadley's  treatise  is  no  less  timely  than  it  is  valuable.  .  .  .  _  Taken  as  a 
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possible  only  to  a  thoroughly  equipped  man,  familiar  with  many  modern  languages." — 
Neiu  York  Nation. 

"  Every  page  of  the  work  bears  witness  to  the  thorough  knowledge  of  the  writer  on 
the  subject,  and  to  his  equal  ability  and  practical  sound  sense  in  its  discussion." — Boston 
Literary  World. 

"  Railroad  men  will  find  much  of  value  in  the  chapters,  while  investors  in  the 
stocks  and  bonds,  as  well  as  shippers,  will  find  all  these  subjects  wisely  and  skilfully 
handled.  It  covers  in  concise  form  very  completely  the  questions  every  day  discussed  in 
the  public  press,  and  every  year  occupying  more  or  less  of  the  time  of  legislators.  — 
Chicago  Inter-Ocean. 


G.  P.  PUTNAM'S  SONS.   New  York  and  London. 

12 


publications;  of  g.  p.  putnam's  sons. 


Kearny.  A  Study  of  American  Finance— 1789- 1835.  By  John 
Watts  Kearny.     i2mo,  cloth 1  00 

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the  diflTicult  problems  of  the  time  were  successfully  met  and  overcome." — Magazine  of 
American  History. 

"  Treats  the  subject  in  a  clear,  earnest,  concise  style  that  is  extremely  pleasing." — 
Newark  Aiiiiertiser. 

"  An  admirable,  concise  statement  of  an  important  subject,  and  will  recommend 
itself  to  many  readers. — Philadelphia  Telegraph. 

Lawton.  The  American  Caucus  System  ;  Its  Origin,  Purpose,  and 
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